How It Works
Learn more about fixed rate second mortgages here. We'll explain what they are, discuss common terms and rates, and explain how to get one.
Fixed Rate Second Mortgages Explained
Fixed rate second mortgages are loans that are secured against your home on which a primary mortgage already exists. In contrast with adjustable-rate mortgage loans (ARMs), fixed rate second mortgages come with a stable interest rate for the life of the loan, which means your monthly payments will also remain the same. Compared to primary mortgages on the same properties, fixed rate second mortgages have less priority. Thus, if you find yourself in default on the loan, you must clear your first mortgage loan prior to paying off the outstanding balance of the second mortgage. Fixed rate second mortgages use your home as collateral, so you always need to keep in mind that you could lose your home if you default on the payments.
Loan Amount
Lenders determine the amount of fixed rate second mortgages on the basis of your home equity. Home equity refers to the difference between the appraised value of your home and the outstanding balance on your primary mortgage. Most lenders allow you to take out fixed rate second mortgages so that the total loan-to-value ratio of your first and second mortgage is equal to 85% of your home's appraised value. Some lenders allow you to take out fixed rate second mortgages up to 125% of the home's appraised value, so this will vary from bank to bank.
Rates, Terms, & Options
Typically, interest rates on fixed rate second mortgages are higher than those on primary mortgages. As with any mortgage, you have the option of taking out a fixed-rate or adjustable-rate loan. Your individual interest rate will depend on your creditworthiness, current market trends, and your total loan-to-value ratio. Generally, fixed rate second mortgages are offered over shorter periods of time than first mortgages, with terms ranging from 15-30 years.
Getting Fixed Rate Second Mortgages
Getting fixed rate second mortgages is very similar to taking out a first mortgage. You will need to shop around for quotes from different lenders and then compare these offers. When you use our site, we will provide you with a minimum of four free quotes on fixed rate second mortgages from various lenders. That way, you don't have to waste your time visiting multiple websites and burying yourself in application fees. All you have to do is fill out our simple, online form to get your free quotes.
For more information, and answers, look through the questions that are frequently asked.
