Many homeowners in Central New Jersey are happy to stay in their homes but they are looking to update their home to a more modern look and feel. In this case I often talk with them about the second mortgage option. A second mortgage is just what it says a mortgage on top of the existing mortgage. It takes second place to the first mortgage as far as collecting from a mortgage company or bank. If the borrower cannot pay off the loan, the first bank has the ability to repossess the home and the second loan holder is out of luck or gets any leftover proceeds in most cases.
To compensate the bank for the added risk, the second mortgage has a slightly higher rate. The good news is that the lender usually takes into account that the homeowner is already working with them and has a history of making on time payments so the bank can wave some of the fees associate with application. If you have equity in your home it is pretty easy to qualify for a second mortgage loan.
Even though you may have your first loan with one bank does not hesitate to check around and see what other banks and mortgage companies are offering for rates and terms on a second mortgage. Mortgage rates and plans change like the wind these days so doing your homework is essential to getting the best deal.
In today’s real estate market many people use the second mortgage to renovate their home. This is a great way to make sure your home has the best value when the market for sellers goes back up in the future. Major repairs such as a new roof, new central air conditioning, or an addition such as a new bedroom can cost a lot of money but you will enjoy the use and the added value over time. (If you would like a list of updates and the expected return on investment simply send us an email to mike@mikedowner.com with the word ROI in the subject line) As we always suggest in our blogs get quotes from three reputable companies before starting any project. These estimates will help you figure out how much money you need to borrow to finish the job.
With any second mortgage there are a couple options on how you get the money. The first is a rather basic lump sum amount. The second is actually a line of credit that you can use as you need it. For instance you can get a second mortgage line of credit for $50,000 and use $10,000 this month and repay some of it then borrow $12,000 in a few months as a project progresses. Think of this like a credit card where you can pay off some or all of the balance while not being charged for what you are not using.
As a professional full time REALTOR we work with the best mortgage people in the business. We would be happy to discuss your situation with you and suggest a couple people who will be able to help you make the right financial decision whether you decide to stay in Central New Jersey or not.