If you are considering a second mortgage on your home, you can save yourself a lot of money by shopping around for the best mortgage. Here are tips to help you shop and avoid common homeowner mistakes. Taking out a second mortgage loan on your home is a popular method of borrowing against your home equity. There are many advantages to taking out a second mortgage over a home equity line of credit; if you are borrowing a large sum of money the main advantage is that your loan will come with a fixed interest rate. If you are wondering how much you will be able to borrow with a second mortgage, most lenders allow you to borrow up to 80% of your homes value, provided you have that much equity. Equity in your home is the difference between what you owe on your current mortgage and the recently appraised value of your home. The interest rate you qualify for depends on a number of factors. Your credit rating is the main factor; however, the lender will consider your debt-to-income ratio along with how much equity you have when deciding how much of a risk you are for lending. When shopping for a second mortgage you will find that interest rates vary from one lender to the next; you will need to evaluate second mortgage loan offers using more than the interest rate as this does not indicate the total cost of borrowing. The Good Faith Estimate that each lender is required to provide you after receiving your application will outline all of these expenses including the closing costs. The interest rate and Annual Percentage rate are not enough to give you the big picture of all costs associated with your second mortgage; always use the Good Faith Estimate when comparison shopping for a mortgage loan. You can learn more about saving money on your second mortgage and avoiding common homeowner mistakes by registering for a free mortgage guidebook. |
