A 2nd mortgage is also a registered lien against your home that takes 2nd position behind the 1st Mortgage.
A 2nd Mortgage usually carries a higher interest rate depending on the Loan to Value - abbreviated as LTV. LTV is the amount of money owing on the property versus the value of the property. In short, the higher the LTV or risk for the lender, the higher the interest rate will be for the 2nd Mortgage.
2nd Mortgages can be taken out against your property for the same reasons as your 1st Mortgage. Either to complete the financing for a purchase or again to pay off loans and credit cards.
Another reason a client can avail of a 2nd Mortgage is when or if their 1st Mortgage was to fall into default for whatever reason - a job loss or unexpected bills. A 2nd Mortgage can be taken out to pay up any arrears and bring the 1st mortgage back into good standing.
At a later date the 1st and 2nd Mortgages can be rolled into one brand new 1st Mortgage to reduce the monthly payments with a lower rate. A 2nd Mortgage is usually a short term fix to unexpected debt problems.
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