Second Mortgage Loan

• Second mortgage loans are generally offered to homeowners as a product that has a fixed rate, a fixed term and a fixed loan amount. The proceeds from a second mortgage loan are typically distributed in a lump sum, as your amount financed should not change during your loan term. You might obtain a second mortgage to complete a large-scale home improvement project, such as a kitchen remodel, a room addition or for the consolidation or your bills and credit card balances.
  
  

Home Equity Line of Credit

• Home equity lines of credit, commonly referred to as a HELOC, can enable a homeowner to obtain a secondary home loan that has variable characteristics. HELOCS will allow you to borrow funds as needed, up to your pre-established credit limit. Variable features of a home equity line of credit may cause your balance, your interest rate and the corresponding monthly payment to change. You might use a HELOC for shopping, to pay recurring monthly bills or to fund your annual vacations.
  
  

Loan Approval

• Acquiring a second mortgage begins with the loan approval process. You may need to contact several second mortgage lenders or banks to discuss loan programs that will meet your requirements. Before offering any loan terms, a second mortgage lender will ask to review your credit history. If you meet the lender's credit guidelines, your income will be observed to determine if you can afford a second mortgage loan. The amount of your second mortgage loan will be based on the usable portions of equity in your home that you can afford to repay.
  
  

Risk

• A greater debt load is secured against your property when your home equity is utilized to finance some of your other goals. Many second mortgages are for terms that exceed 10 years. You should weigh the expense of a long-term second mortgage to ensure that your borrowing needs are justified. Carefully consider the risks of obtaining a second mortgage, as you will have the responsibility for making two mortgage payments. Excessive mortgage obligations could lead to the loss of your home. Lower your risks of a home foreclosure by comparison-shopping three or more lenders to find a favorable monthly payment. Second mortgage loans are typically offered at higher interest rates than you might find on first mortgage loans.