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Ways to Get a Second Mortgage
A second mortgage in Alabama is actually a loan that was taken just after the homebuyer is soon to be done with the first mortgage. There are many reasons why homeowners opt to get a second mortgage. Events such as paying off debts, financing house renovations or even just to cover a portion of the down payment on their first mortgage. The second mortgage usually has a much higher interest rate if compared to the first mortgage. The loanable amount is based on the house’s equity. This is the difference between the amount that is owed on the property and the most updated value of the real estate.
Homeowners who would like to have a second mortgage loan can usually choose from a year or as long as 20 years for the mortgage term. It’s relatively the same with their first home mortgage. Homeowners will be charged with a higher monthly statement if they choose a much shorter term. However, choosing a longer term may mean that their monthly statement may be much smaller, but they’ll be paying a much higher mortgage interest in the long run. So if in case you decided to get a second loan to do some renovations, it would be best to choose a much longer term so that you won’t be surpised about your monthly mortgage payment.
Like all mortgage companies in states like Alabama, mortgage lenders do charge a lending fee. That’s on top of the closing costs like the loan origination fees, appraisal costs and also mortgage points. Mortgage points are fees that can be used to lower the interest rate on the loan. One point is equal to one percent of the money that is borrowed. So if in case you borrowed a total amount of $25,000 to make some renovations, purchasing 8 points for your loan would cost $2,000. However, a number of points to be charged may vary from one mortgage company to another. So it would always be best to check it with other lenders to know the best rates. You should get the cost of the fees in writing before agreeing to the mortgage. Some states do have limits on the fee amount that the mortgage company may charge on the second loan. Any state banking commissioner in cities like Birmingham can provide you all the information that you need on state limits.
Basically, the same process with your first mortgage will be the same thing for your second loan. You need to prepare all the paperwork and personal information that’s needed before you apply for a second loan. Keep in mind that there are other fees involved in your new mortgage request. So it would be best to have an extra stash of money hidden if in case you need it.