Can You Have a Second Mortgage Lower Than the First?
Most consumers already know applying for a second mortgage is different today than it was 10 years ago. Today, lenders have higher standards and want to know more about each borrower.
Typically, a second mortgage is more expensive to consumers than a first mortgage. However, because interest rates are so low right now, finding a second mortgage with lower interest is possible. Many second mortgages come with an adjustable interest rate, but can save the homeowner money if the current mortgage is a a high-interest first loan and the borrower is not eligible to refinance it.
If you want to make home improvements or pay off debt, accessing the equity in your home may be your best possible option, but you need to be careful. If you are thinking of applying for a second mortgage of any type, you should first evaluate your full financial picture. Make sure to consider any costs of refinancing, comparison shop for the best loan product, and be certain to take the time you need to make the right decision.
Additionally, qualifying for a second mortgage is more difficult now due to the fact that home values have dropped by so much in the last three years. Lenders are increasingly more reluctant to be in second position because of the risk factor and because they have been burned by foreclosures. Lenders who found themselves holding seconds on foreclosed properties basically lost everything since foreclosure proceedings paid off the first lien holder first. If anything was left over, which most of the time there was not, it would go to the second lien holder.
In order to qualify for a second mortgage (Home Equity Line of Credit or Fixed Rate Second) you need to have great credit and a lot of equity.