Hawaii Mortgage Broker

Second Mortgage – Questions and Answers

If you consider having a second mortgage as another option of getting finance you should be aware of the interest rates and PITIs or the PMIs. If you are all confused, then you keep reading for the most frequent questions that one can ask and you will find the answers to clarify the matter in your mind before taking a decision.
What is the use of a second mortgage?
Most of the home buyers (the ones who are at their first house buying) who use a second mortgage do this in concurrence with the first mortgage as they want to make a down payment on the first home mortgage in order to avoid the high costs involved in a private mortgage insurance.
On the other side there are the homeowners who use the second mortgage to benefit from the equity they have built to pay the expenses that have emerged when buying a car or costs involved in college education.
Can I be charged with a higher interest rate by a mortgage lender in case I get the second mortgage from a different one?
There can not be any reason for a the initial mortgage lender to charge you a higher interest rate once you have obtained a second mortgage. Most lenders do not go for this solution when they have a borrower who has availed of a second mortgage with another mortgage lender.
As a matter of fact, to have a second mortgage only makes the first one more secure. The reason lies in that both the second mortgage lender and the borrower intend to keep the payments going for the initial mortgage loan. In case the borrower fails in doing so, the second-mortgage lender will have to make the payments on the first loan as they do not want to face a foreclosure.
I have considered to go for a second mortgage, but does the option for a balloon mortgage work?
You have to consider this option better, because if you won’t be able to pay off the balloon in due time, then you either have to sell the house or lose it. In case you want to take this option then look for a balloon mortgage with a longer term so you will have more time to get a refinance. You will have to aim for either a selling, a renegotiating or a refinancing with another lender before that balloon is due.
What happens in case the first lender doesn’t know about the second mortgage; is it legal to hide it from them?
Whenever a second mortgage is not revealed it is considered a fraud towards the first lender. This thing happens in the real estate department but rarely do the lenders file a law suit for the seller or the borrower. But keeping the silence on a second mortgage can be rather perilous to you; what if you won’t be able to make the payments, then there is no legal back-up of a secured second mortgage.