Second Mortgage Quotes

Getting a Second Mortgage Quote
Second Mortgage quote programs, and particularly lines of credit, may allow you to use your real estate equity for everything from debt consolidation to paying college tuition. You put your own house at risk, so be realistic when you compare loan amounts, rates, and terms.

Borrow the amount you actually need.
If you still owe $100,000 on your $150,000 house, and your lender uses an 80 percent loan-to-value (LTV) ratio, you could borrow up to $20,000 (80 percent of your home's appraised value minus the $100,000 you still owe). You may need the whole amount, but remember that represents a second mortgage quote payment at a higher interest rate than your original loan, and you will have to pay off both loans when you sell your house. It's prudent to take out less than the full amount if you can.

Do your homework when you shop for home equity lines of credit.
These flexible loans vary widely, and some don't charge an annual fee. Compare the interest, teaser rates and rate caps on every line of credit you consider. Finally, look for a line of credit that allows you to pay down your principal every month, instead of making interest-only payments.

When comparing second mortgage loans, look at short-term and long-term costs.
Short-term costs include origination fees, points and closing costs. (Many lenders advertise "no-cost" loans, for which you usually pay a half-point more in interest.) Long-term cost is the total amount of interest you'll pay over the life of the loan. This is easy to calculate with a fixed-rate loan, using an amortization chart from your lender. If your loan is adjustable, you'll need to compare the annual percentage rates (APRs), points, index rates, margins, lender fees and other loan terms. Lenders are required to give you all this information when you apply for the loan.

Watch out for negative amortization.
This applies to both second mortgages and lines of credit. If you have an adjustable-rate second mortgage or home equity loan, your monthly payment cannot be fixed. As with any adjustable, your payments should increase when interest rates rise. If your adjustable program specifies fixed payments, that means the additional interest is added to the end of your loan, and you'll be expected to pay this extra money at the end of the loan term. This can also happen with a line of credit. Avoid both situations by asking your lender to specify your payment terms very clearly before you commit.

Compare terms with a refinancing/cash-out package before you commit.
Getting a second mortgage may still be the best route to tapping your home value, but it pays to consider all your options, including refinancing.