How Long Does It Take To Get A Second Mortgage?
There are a number of reasons why you might be considering a second mortgage, perhaps you are needing money to fund future studies, are looking to do repairs around the home, or are experiencing a family emergency. Whatever the reason, life can often throw curveballs our way which requires some extra cash. Tapping into your home’s equity can be a great way to take care of any urgent expenses, which is where getting a second mortgage comes in.
Here, we’ll cover what a second mortgage is, the types of second mortgages available, how you can get one, and how long the whole process of getting a second mortgage may take to give you better insight into the details.
What Is A Second Mortgage?
A second mortgage is taken out against a property which already has a mortgage secured against it. When homeowners take out a second mortgage, a charge is typically taken out against a portion of their property, meaning that if they fail to repay their loan, the lender has a right to take control of their home. It is, therefore, crucial to consider all your options before taking out any kind of loan, particularly secured loans such as second mortgages.
One of the great things about second mortgages is that you can use the money you take out for almost anything, making them highly popular as sources of emergency income. Second mortgages also offer lower interest rates compared to credit cards which can be beneficial for those looking to pay off their credit card debts.
Types Of Second Mortgages
Generally, there are two major types of second mortgages which borrowers can choose from: a home equity loan or a home equity line of credit (HELOC). The type of second mortgage you opt for will depend on how urgently you need the money and your personal circumstances.
Home Equity Loan
A home equity loan allows you to take out a lump-sum payment from your equity. With this second mortgage option, your provider will give you a percentage of your equity in cash which you will then be required to repay in monthly instalments with interest, just like your original mortgage. A typical home equity loan term will range from 5 to 30 years, giving you this amount of time to repay the loan, though the time frame will be predetermined before you receive your money.
Home Equity Line Of Credit (HELOC)
Alternatively, home equity lines of credit or HELOCs do not give you money in one lump sum. Instead, they work similarly to a credit card whereby the lender will approve you for a line of credit based on the amount of equity in your property. You are then able to borrow against the credit the lender extends to you. Much like credit cards, HELOCs use a revolving balance meaning you can use the money on your credit line multiple times as long as it is repaid.
HELOC’s are particularly useful to pay school fees in that you only draw the amount needed each term.
The thing to remember about HELOCs is that they are only valid for a predetermined amount of time referred to as a ‘draw period’. Once your draw period has ended, you must repay the outstanding balance over a pre agreed term of between 5 and 25 years. Failing to do so could result in your lender seizing your home.
How Can I Get A Second Mortgage?
In order to get a second mortgage, you can take it out either with your current lender or someone else if you see a better deal elsewhere. When applying for a second mortgage, the lender will generally run an affordability check to make sure you can afford the monthly repayments on both your existing mortgage and your second one. The affordability check will include a review of your credit score, plus your income and outgoings. It is therefore better to have a good credit score when applying for a second mortgage to improve your chances of success. Yet the most basic requirement for second mortgages is that you have some equity built up in your home.
How Long Does The Process Take To Get A Second Mortgage?
The standard timeframe to get a decision on your second mortgage is between 5 working days to 4 weeks. Though the process can often take longer if the lender needs to value your home in order to verify your equity. Also, if your application has any unique elements, the process can take longer as well. However, you can generally expect your second mortgage application to be a quick process, particularly if you stick with your original lender as they will have previous knowledge about your finances and credit score.
If you'd like to explore a second mortgage apply now and one of the team will can contact you to discuss your requirements.