What Interest Rate Should I Expect To Pay On A Second Mortgage

The interest rates on Second Mortgages are typically higher than those
of First Mortgages. This is primarily due to the increased risk for the Second Mortgage Lender.
Simply, in the event of default, the Second Mortgage holder would only
recover his funds from the proceeds after the First Mortgage was satisfied. In addition to the
First Mortgage any Municipal Taxes due, Legal Fees Payable and all
Processing costs would have to be paid as well, before the Second Mortgage
lender would receive any
funds to satisfy the Second Mortgage. In some cases of default
the Second Mortgage lender may choose to assume the First Mortgage to
protect his interest in the property. This will be not only time consuming
but costly for the Second Mortgage lender.
The Interest rates determined by both Institutional and Private Lenders
on Second Mortgages will be based on many underwriting criteria.
Credit History of the applicant
Income
Location, Type and Condition of Property
Debts that may remain after the Second Mortgage is in place
The total Loan to Value (LTV): the total amount borrowed as a
percentage of the value of the home

In the case of a homeowner who has good credit, stable income,
acceptable property, low debts and just requires, let”s say,
a Line of Credit. They should have no problem in securing a
loan to 80% of the homes current value and should expect an
interest rate close that of a First Mortgage or Bank Prime.
However, a homeowner who may have weak credit, less stable or
verifiable income, outstanding issues such as tax arrears or
credit collections may expect to be able to secure a Second Mortgage
loan to 65%-85% of the home current value with an interest rate similar to that of consumer loans.
And finally, a homeowner who simply needs the lender to overlook all the underwriting guidelines and
lend the money solely on the Equity in the home may expect to be able to secure a Second Mortgage loan
to 65%-85% of the home current value with an interest rate similar to that of a consumer credit card.

The interest rates on Second Mortgages are typically higher than those
of First Mortgages. This is primarily due to the increased risk for the Second Mortgage Lender.
Simply, in the event of default, the Second Mortgage holder would only
recover his funds from the proceeds after the First Mortgage was satisfied. In addition to the
First Mortgage any Municipal Taxes due, Legal Fees Payable and all
Processing costs would have to be paid as well, before the Second Mortgage
lender would receive any
funds to satisfy the Second Mortgage. In some cases of default
the Second Mortgage lender may choose to assume the First Mortgage to
protect his interest in the property. This will be not only time consuming
but costly for the Second Mortgage lender.
The Interest rates determined by both Institutional and Private Lenders
on Second Mortgages will be based on many underwriting criteria.
Credit History of the applicant
Income
Location, Type and Condition of Property
Debts that may remain after the Second Mortgage is in place
The total Loan to Value (LTV): the total amount borrowed as a
percentage of the value of the home

In the case of a homeowner who has good credit, stable income,
acceptable property, low debts and just requires, let”s say,
a Line of Credit. They should have no problem in securing a
loan to 80% of the homes current value and should expect an
interest rate close that of a First Mortgage or Bank Prime.
However, a homeowner who may have weak credit, less stable or
verifiable income, outstanding issues such as tax arrears or
credit collections may expect to be able to secure a Second Mortgage
loan to 65%-85% of the home current value with an interest rate similar to that of consumer loans.
And finally, a homeowner who simply needs the lender to overlook all the underwriting guidelines and
lend the money solely on the Equity in the home may expect to be able to secure a Second Mortgage loan
to 65%-85% of the home current value with an interest rate similar to that of a consumer credit card.