Do you have a low or bad credit score and need a loan and have you faced rejection from banks and other lenders? If you want to consolidate debt, complete home renovations, cancel credit cards, or whatever the case may be, second mortgages are a great option that can help you now and in the future. By consolidating your debt with a second mortgage and eliminating all your credit card and other consumer debt, you will greatly improve your credit score.
The bank puts a lot of emphasis on your credit score when determining whether or not to grant you a loan, as you may have already figured out, if your credit score is below 650, you are likely to have trouble getting a loan from the bank. As mentioned above, using a second mortgage to consolidate your debts will “clean” your credit report and improve it significantly. You should see it as a stepping stone process, in which you consolidate your debts with the second mortgage, then continue to rebuild your credit, and then refinance the first and second mortgages into a new low-rate first mortgage with an institutional lender such as a bank.
Finding a second home loan for bad credit can be difficult because finding a lender to take on this riskier position can be difficult. Talk to an experienced mortgage broker in your area and you will receive professional advice and service, and you can be sure you have a solid financial plan.
Mortgage brokers have access to many second mortgage lenders to find you the best possible second mortgage rate. Your broker will inform you in detail of the loan terms and financial plan to refinance you from the second mortgage into a new low-rate mortgage that you may not currently qualify for with your current credit score.
Second Mortgage lenders don’t put as much emphasis on your credit score as an institutional lender does as a bank does. However, a second mortgage lender still wants to see that you can repay the loan and may require that some or all of the funds from the second mortgage be used to pay off 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 primarily concerned with the amount of equity in your home because this is what the loan size will be based on. The lender will only lend up to a certain loan-to-value ratio, which is often around 80%, and some lenders go as high as 85%. what does this mean to you? If you own a $ 300,000 home and currently have a $ 200,000 first mortgage, this means that the second mortgage lender will be willing to provide you with up to $ 40,000 as a second secured mortgage against the home ($ 40,000 + $ 200,000 = $ 240,000, which is 80% of the home’s value ($ 300,000). To begin the process, you will need to fill out an application and get an idea of the approximate value of your home. If the mortgage broker thinks you may qualify for a second mortgage, the next step is review your credit report and order a home appraisal The second mortgage lender will require one of the approved home appraisers to perform an appraisal of your property and you will be responsible for the cost of the appraisal which averages about $ 300. the appraisal is complete and there are no major problems with the house, then the second mortgage lender will issue what is called a mortgage commitment that will have all the loan terms and it is your mortgage The broker’s responsibility to make sure you fully understand the terms. If you agree to the terms of the loan, the next step is to send everything to a lawyer to finalize the transaction. This is the same process you went through when obtaining your first mortgage. The attorney will finalize the transaction for you and once everything is complete, they will deliver 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 obtain second mortgages to access equity and address financial emergencies.
Can you refinance a second mortgage?
Yes! refinancing with your second mortgage once your credit has improved is essential and should be planned; second mortgages are usually short terms of 1 to 2 years. You should not plan to renew your second mortgage; If the funds from the second mortgage are used correctly, you will be able to combine the two mortgage loans into a new first mortgage with a lender A or B by the end of the term. You should be aware of the costs of doing this, if you are breaking one of the terms of your current mortgage to do this refinance, be sure to calculate the penalty of doing so to determine if it is worth it. You will also see more legal costs and possibly a new appraisal, but most of the time, refinancing both mortgages into one is your best option, as second mortgages tend to have a high rate.
