December 11, 2001
By: Bev Dodd
Second mortgage loan: Be sure to shop around
A second mortgage loan has been a means by which homeowners have been able to use their home's value to save money. By taking out a second mortgage loan, a borrower is able to combine the balances of current bills and debts into one loan... and one payment. We'll discuss this more below.
As you shop for your second mortgage loan, compare interest rates (fixed rate or variable), fees, and find out if they charge prepayment penalties (most do not). The market rate for borrowers with good credit varies from time to time. If you think that rates will increase, you may want to consider "locking in" an interest rate. If you do, I suggest you obtain written confirmation of that lock and pay attention to when the lock expires.
When researching your options for a second mortgage loan, you may really just need to decide whether you want to refinance, get a second mortgage loan or home equity line of credit. The first thing to understand is that while all three of these loans have costs associated with them, the interest rate is typically higher on a second mortgage loan or line of credit. This is because a second mortgage carries higher risk to the lender. In the event you were unable to pay off your loans, the lender on the first mortgage would get paid first and the lender of your second mortgage would be paid whatever amount was left over. The higher the risk, the higher the interest - therefore second mortgages have a little higher interest rate.
Using a second mortgage loan to reduce your monthly debts can be a smart way to realize significant monthly savings. Eliminate the burden of high interest credit cards that seem to have never ending balances.Shop around. Call several savings and loan institutions, banks and mortgage lenders to obtain information about current interest rates, fees and points.
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Bev Dodd is a successful author and publisher of http://www.family-refinance-consolidation-loans.com.
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