Thursday, 04 September 2014
Information On Obtaining A Second Mortgage
When obtaining a second mortgage, as with any mortgage, it might be beneficial to seek independent advice wherever possible. A specialist independent mortgage advisor will have access to a wider range of products, whereas lenders can only advise on their own brand.
So you want a second mortgage?
As with any type of loan, you may be asked to disclose certain personal or financial information. Annual income and expenditure are the first factors that a lender will consider, as well as any assets at your disposal. Security checks are rigorous, so when applying you should have bank statements and pay slips to hand as well as the same for your partner (if necessary). Joint loans will be made against the combined sum of your income, so you will both have to conform to the lender's specifications. Because a second home can often mean that your finances need to stretch further, a second home loan will usually be more restrictive than the terms of your first mortgage, meaning higher rates and closer scrutiny of your application.
For a second home, you will have a limited choice of finance options which will depend on the purpose of your proposed purchase and your present circumstances. The chances are that you will not be able to obtain an unsecured loan for a second home, as the perceived risk to lenders is too high. If you already own your own home you will likely be looking to take on a secured loan, which is in essence a home-equity loan. Equity loans are typically based on a variable rate which can fluctuate over time. This is risky because if your repayments are increased and you are unable to make them, you will be at risk of losing both your first and second homes at once.
If you are buying-to-let, you may be able to acquire a buy-to-let mortgage. Because property investment loans are generally repaid through the rental income generated by your property, it is important to find a favourable rate. Interest only loans may also be worth considering. With interest only loans, you only repay interest (as the name suggests) on your property, you do not reduce the capital owed to your lender. This is worthwhile when you believe the property will increase in value significantly.
Whichever finance option you decide to take on your property, you will still require insurance on your second home. It is important to protect your investment, and coverage should always be sufficient for your needs. With HomeProtect you can get a competitive online quote for unoccupied insurance for second homes, whether you are buying to let or to use as a holiday getaway.
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What is a second charge on a mortgage?
A second mortgage, sometimes called a second charge mortgage, is a loan which allows a homeowner to use the equity in their property as collateral against a new loan. A second mortgage can be cheaper than remortgaging your property.