Interest rates

Second mortgages are more attractive as interest rates rise

A second mortgage is a loan secured by a deed of trust on real property. The second mortgage is a subordinate lien to the first mortgage and is secured by the equity that exists above the balance of the first mortgage.

There are many reasons a person might choose to take out a second mortgage, but the biggest reason today is that most homeowners have a first mortgage at a much lower rate than current rates and they wouldn’t definitely not cash first mortgage refinance to get $100,000 for a home improvement project or debt consolidation if their $400,000 first mortgage was at 3.5% fixed.

HELOCs, or home equity lines of credit, are popular, but a 10- or 15-year fixed-rate closed second mortgage is another alternative when you’re looking to cash out and the homeowner doesn’t want to touch their first low rate mortgage. with a 10 foot pole.

HELOCs are adjustable rate loans that can change monthly, and most are based on the Wall Street Journal prime rate plus a margin based on the FICO score. A bridge loan is usually secured by a second mortgage, and the purpose of this type of loan is for people who are selling soon but need the money now to be able to buy the new house first and sell the residence of leaving after moving into their new home.

Second mortgages are now very popular, but every homeowner’s case is different and should be reviewed by a qualified mortgage professional.

Credit card debt, student loans, personal loans, and auto loans can overwhelm people with monthly payments and interest charges. If a homeowner has $120,000 of this type of debt, they may have a total of $2,000 per month in payments. If this homeowner has enough equity in their home and can get a $120,000 fixed rate loan at a lower rate than they’re paying on all that other debt, it could save them $1,000 to $1,200. $ per month.

The key thing to remember with a consolidation loan is to make sure that the $1,000 in savings per month is spent wisely by paying off the mortgage or, better yet, investing the savings monthly so that the next time something is needed, credit cards are not used. because credit cards must always be paid in full monthly.

Jim Porter, NMLS #276412, is the Branch Manager of Solano Mortgage, NMLS #1515497, a division of American Pacific Mortgage Corporation, NMLS #1850, licensed in California by the Department of Financial Protection and innovation within the framework of the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.