Second Mortgage & Bad Credit Loans
Do you have a low or bad credit score and are in need of a loan and have faced rejection from the banks and other lenders? If you want to consolidate debt, complete home reno's, payoff credit cards or whatever the case may be, second mortgages are an excellent option that can help you out now and in the future. By consolidating your debt with a second mortgage and eliminating all of your credit card debts and other consumer debts you will be making some serious improvement to your credit rating.
The bank puts a lot of emphasis on your credit score when determining whether or not to give you a loan, as you may have already found out, if your credit score is below 650 you will likely have trouble getting a loan from the bank. As mentioned above, using a second mortgage to consolidate your debts will "clean up" your credit report and make significant improvement to it. You need to look at it as a stepping stone process, where you consolidate your debts with the second mortgage, then continue to rebuild your credit, and then refinance the first and second mortgages into one new low rate first mortgage with an institutional lender like a bank.
Finding a second mortgage bad credit loan can be difficult because finding a lender to take on this more risky position can be difficult. Speak with an experienced mortgage broker in your area and you will receive professional advice and service, and can feel confident that you have a solid financial plan.
Mortgage brokers have access to many second mortgage lenders to find you the best second mortgage rate possible. Your broker will thoroughly inform you on the lending terms and the financial plan to refinance you out of the second mortgage into one new low rate mortgage that you may not currently qualify for with your current credit score.
Second Mortgage lenders do not put as much emphasis on your credit score as an institutional lender like a bank does. However, a second mortgage lender still wants to see that you can service the loan and may require that the some or all of the second mortgage proceeds are used to payoff other high rate debt.
Get A Second Mortgage To Refinance With Bad Credit
So how does a second mortgage work? The second mortgage lender is mainly concerned with the amount of equity in your home because this is what the loan size is going to be based upon. The lender will only lend up to a certain loan to value ratio which is often around 80%, with some lenders going as high as 85%. What does this mean to you? If you own a $300,000 home, and you currently have a first mortgage of $200,000, this mean the second mortgage lender will be willing to provide you with up to $40,000 as a second mortgage secured against the home ($40,000 + $200,000 = $240,000 which is 80% of the home's value ($300,000). To start the process you will need to fill out an application and have an idea of the approximate value of your home. If the mortgage broker feels you can qualify for a second mortgage the next step is to review your credit report and order an appraisal on the home. The second mortgage lender will require an appraisal to be completed on your property by one of their approved home appraisers and you will be responsible for the cost of the appraisal which averages around $300. Once the appraisal is completed and there are no significant issues with the home, then the second mortgage lender will issue what is called a mortgage commitment which will have all of the terms of the loan and it is your mortgage broker's responsibility to ensure you fully understand the terms. If you agree with the terms of the loan, then the next step is to have everything sent off to a lawyer to finalize the transaction. This is the same process as you went through when securing your first mortgage. The lawyer will finalize the transaction for you and once everything is completed he or she will then release the funds to you.
How can a mortgage broker help you? Brokers have relationships with Bad Credit Second Mortgage Lenders who will work with homeowners to provide as much LTV as possible, and have helped many clients get second mortgages in order to access equity and take care of financial emergencies.
Can You Refinance A Second Mortgage?
Yes! refinancing out of your second mortgage once your credit is better is critical and must be planned for, second mortgages are often short terms of 1-2 years. You should not plan on renewing your second mortgage, if the funds are used properly from the second mortgage you will be able to combine the two mortgage loans into one new first mortgage with an A or B lender by the time the term is up. You must be aware of the costs of doing this, if you are breaking one of your current mortgage terms to do this refinance, make sure you calculate the penalty of doing this into whether it is worth it. You will also be looking at more legal costs and possibly a new appraisal but more often than not, refinancing the two mortgages into one is your best option as second mortgages often come with a high rate.
