second mortgage loan
is a subsequent loan and subordinate to the earlier
mortgage. In other words, a second mortgage loan is used as
collateral pledged for the first loan.
Length of Second Mortgage Loans
Second mortgage loans have varying lengths with which they
are eventually paid off. Some second mortgage loans may last
for as long as 15 or 20 years. Other second mortgage loans
only require one year for repayment.
When you're thinking of taking on a second mortgage loan,
you will need to know what term best suits you. Discuss the
repayment terms of the second mortgage loan with your bank
or lending company. For instance, you get a second mortgage
loan worth $20,000 to make some home repairs. With this
amount, you might want to take on a second mortgage loan
that will allow you to repay the entire amount in one or two
years. If you pay a second mortgage loan that has a shorter
term, the monthly payments may be too high.
Payment Calculations for Second Mortgage Loans
Before taking on
loan, be sure that you understand a couple of things first.
Know how much your monthly payments will be for that second
mortgage loan. Moreover, it is also helpful if you also have
an idea as to where those second mortgage loan payments will
Some second mortgage loans require you to make monthly
payments on both interest and principal. Other second
mortgage loans only require you to pay the interest of the
The former type of second mortgage loans will allow you to
significantly shorten your payoff period since with each
payment you make, you are also chipping away at the
principal. With the interest-only second mortgage loan
however you will be required to pay back the entire amount
that you borrowed as soon as the term ends. This type of
second mortgage loan is also called balloon payment loans.
Second Mortgage Loan Costs
Fees may be charged by some lending companies for the money
you borrow on second mortgage loans. The fees, referred to
as "points," are usually a percentage of the second mortgage
loan. One point on your second mortgage loan is equivalent
to one percent of the amount you borrow.
So, if you were to get a second mortgage loan of $10,000
with an eight-point fee, then you would have to pay $800 in
"points." Second mortgage loan companies may charge you in
varying number of points so if it might be helpful if you do
a comparison first.
Second Mortgage Loan Rates
Second mortgage loans have different payments plans. Most
second mortgage loans have a fixed rate payment included in
their payment plans. If you have a fixed rate second
mortgage loan, the interest rate will be set for the whole
loan term. This means that your monthly payments for your
second mortgage loan will not be affected by any outside
Some companies also offer second mortgage loans with
variable rate payments. These variable rate second mortgage
loans periodically experience rate adjustments. A variable
rate second mortgage loan might be cheaper than a fixed rate
payment in the long run. But this is only provided if the
interest rates of second mortgage loans go down. If interest
rates rise, then your monthly payments for your second
mortgage loan will rise as well.