If you’ve been thinking about a second mortgage for a while, now may be the right time to take one out. Deciding to do that can be a serious event, because it’s a big step financially. You also want to carefully consider the reasons why you’re doing it, so you don’t end up taking on more than you can comfortably handle. If you do decide to take out a second mortgage, you need to do your research and be prepared. Those are two of the very best ways to ensure that you’re going to be as ready as possible, and that you will get a mortgage that’s going to work for your needs and your finances. Don’t be too hasty to choose the first lender you find, since that might not give you the best deal. Here are seven signs that you might be ready for that second mortgage.
1). How does your credit look?
Among the most important things to do before you take out a second mortgage is make sure your credit is ready for that. If you haven’t seen your credit report and score lately, it may be time to check into that and make sure there aren’t any mistakes or problems. Even something simple could become a big issue if it’s incorrect or if you were supposed to correct in and didn’t do so. Fortunately, most of that is completely avoidable by taking the time to clean up your credit and make it as good as possible before you start applying for a second mortgage.
2). Do you have specific plans for the money?
For something like financing your home repairs, a second mortgage can be a great choice. It’s also good for going back to school, or even for traveling. People can do whatever they want with that money, but the lender will probably ask them what their intentions are. You should be prepared for that question, since it’s one that you can expect to be asked. It also allows you to reflect on what you’re going to be doing with the money, and if those plans are worth the potential risk to your home that comes with a second mortgage.
3). Is your income stable?
Having a stable income is critical for a second mortgage. You don’t want to risk losing your home because your income was cut or your job went away. While there are no guarantees in life, having a stable job that you’ve worked at for some time, or long-term, stable, self-employment income, can really help you feel confident about taking out a second mortgage. That way you won’t have as many worries, and you won’t feel like you’re putting so much at risk when you choose to apply for a second mortgage.
4). Do you have enough equity in your home?
As you’re choosing to take out a mortgage, you also need to have a home that’s worth enough to get that mortgage. If you don’t have equity in your home, you’re not going to be able to get another mortgage on top of the one that you already have. Or, you may not be able to get a second mortgage that’s as large as what you would hope for. In some cases that’s just as bad as being denied completely, because a smaller amount may not give you enough to do what you need.
5). How long have you wanted a second mortgage?
Consider how long you’ve wanted to have a second mortgage. If it’s a brand new idea you might want to think about it for a while. Second mortgages are expensive with the fees you’ll be charged, and they also put another lien on your home. If you’ve wanted to have a second mortgage for a very long time, though, now might be the right time to make that choice and apply for the second mortgage you really want and could use.
6). Have you talked to your lender yet?
Talking to your lender is very important when you want to take out a second mortgage. You can find out whether you qualify with a few simple questions, some financial information, and a check of your credit report. Then your lender will be able to give you all the information you need to know as to whether you should proceed with your application or whether you should wait longer because of financial issues that you might be able to clear up in the future. If you need to wait, your lender can also let you know what you should work on, so you can be better prepared in the future.
7). How are home values in the neighborhood?
Looking for signs that you’re really ready for that second mortgage can help you make the right decision, so you don’t put your home or finances at risk. One of those signs includes the home values around your neighborhood and city. If those values are going up, your home’s value may be higher, too. That can mean you have more equity in your house, and will have the potential to qualify for a larger second mortgage. You’ll need to have an appraisal done as part of the second mortgage process, but you can also get a lot of information by researching home values beforehand. That way you’ll have a much better idea of what to expect.
2 Point Highlight
If you’ve been thinking about a second mortgage for a while, now may be the right time to take one out.
Looking for signs that you’re really ready for that second mortgage can help you make the right decision, so you don’t put your home or finances at risk.
