Current Mortgage Rates
Saturday, September 06, 2008
Second Mortgage is a home loan taken against home equity that is kept as collateral for the loan. It carries rights subordinate to those of the first mortgage. This implies that if the property is under foreclosure, the first mortgage must be fully paid off before the second mortgage holder is to be paid.
For example, Harry took a mortgage of $4,00,000 on his home a few years ago. He still has to pay back $1,50,000. Now he takes another mortgage based on his home equity, that is, $2,50,000 ($4,00,000 -$1,50,000 = $2,50,000). This home loan is a second mortgage on the same property.
The main disadvantage with second mortgages is that you are risking your home by using one. This is a serious risk: if you can't pay the loan back, a second mortgage can be catastrophic. Make sure that your intended use of funds is worth the risk you're taking by using a second mortgage.
Another drawback is that second mortgages have slightly higher rates than senior mortgage rates. This is because the second mortgage won't be paid until the first one is (in the event of a default). Because the loan is riskier than a plain-vanilla mortgage, the rate is higher. However, the rate may be lower than alternative sources like credit cards. Now, before you apply for a 2nd mortgage, prepare for and budget for the costs. In addition to committing to a monthly payment, you might have some up-front costs to get your 2nd mortgage processed.
For example, Harry took a mortgage of $4,00,000 on his home a few years ago. He still has to pay back $1,50,000. Now he takes another mortgage based on his home equity, that is, $2,50,000 ($4,00,000 -$1,50,000 = $2,50,000). This home loan is a second mortgage on the same property.
The main disadvantage with second mortgages is that you are risking your home by using one. This is a serious risk: if you can't pay the loan back, a second mortgage can be catastrophic. Make sure that your intended use of funds is worth the risk you're taking by using a second mortgage.
Another drawback is that second mortgages have slightly higher rates than senior mortgage rates. This is because the second mortgage won't be paid until the first one is (in the event of a default). Because the loan is riskier than a plain-vanilla mortgage, the rate is higher. However, the rate may be lower than alternative sources like credit cards. Now, before you apply for a 2nd mortgage, prepare for and budget for the costs. In addition to committing to a monthly payment, you might have some up-front costs to get your 2nd mortgage processed.
- Appraisal fees for your 2nd mortgage
- Points
- Application costs for the 2nd mortgage, which may not be refundable if you're declined!
- Other closing costs.
Is a Second Mortgage Different From a Home Equity Loan?
Second Mortgage versus Refinancing
Are Two Mortgages Less Costly Than One?
Should I Consolidate Debts With a Second Mortgage?
Raising Cash: Is a Second Mortgage Cheaper than a Cash-Out Refinance?
Second Mortgage versus Refinancing
Are Two Mortgages Less Costly Than One?
Should I Consolidate Debts With a Second Mortgage?
Raising Cash: Is a Second Mortgage Cheaper than a Cash-Out Refinance?
Benefits of Consolidating your First and Second Mortgages?
Do You Know Your Lender's Policy on Subordination?
How to arrange for a second mortgage for Home Improvements?
Do You Know Your Lender's Policy on Subordination?
How to arrange for a second mortgage for Home Improvements?
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Second Mortgage
- What is Second Mortgage
- Is a Second Mortgage Different From a Home Equity Loan
- Second Mortgage versus Refinancing
- Are Two Mortgages Less Costly Than One
- Should I Consolidate Debts With a Second Mortgage
- Is a Second Mortgage Cheaper than a Cash-Out Refinance
- Benefits of Consolidating your First and Second Mortgages
- Do You Know Your Lender's Policy on Subordination
- Second mortgage for Home Improvements
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Current Mortgage Rates*
Loan Type National Average |
|
| 30-yr. fixed | 6.38% |
| 30-yr. fixed jumbo | 7.00% |
| 15-yr. fixed | 5.88% |
| 15-yr. fixed jumbo | 6.50% |
| 7/1 ARM | 6.25% |
| 5/1 ARM | 6.00% |
| 3/1 ARM | 5.88% |
| 1-yr. ARM | 6.00% |
| 1-yr. LIBOR ARM | 5.50% |
| 10/1 ARM | 7.88% |
*Mortgage Rates Updated: 09/04/2008