Should you get a second mortgage?

 

With your financial goal now that you have paid your home in Carlsbad off years ago, is to simply make payments so you could own your home free and clear.  But what if you need some funds? Is it worth it to take another mortgage out?

There are things to research about with a lender if that is your case. Take into consideration these tips according to an article at realtor.com:

The article at realtor.com obtained the opinion of divisional vice president of the Skyline Financial Corporation Ken Maes that when deciding whether or not it’s the right choice. Maes expresses to prospective second-round mortgages to home owners in Carlsbad to ask themselves two critical questions. “What is the money going to be used for and does it make sense?”

Is there a better way to pay for your new financial endeavors, and how are you going to utilize this new money from a mortgage. Home and car repairs usually call for a smaller loan like a home equity loan. However, something like a second home and/or vacation home in Carlsbad – a second home mortgage could be a good idea.

Mortgage Terms

According to Maes, the new mortgage is nothing different from the first. The three decisions to make are these:

  • How long will your mortgage be?
  • Will you choose an adjustable rate or a fixed rate?
  • Who will back your loan?

Usually the mortgage stretches between 15 and 30 years. Private lenders obtain different fees and terms through the government like the Federal Housing Authority of the Department of Veteran’s Affair.

Qualifying Loan

You’ve been through this process before, i.e. the underwriting process, confirming your income, checking your credit history and verifying your down payment or equity, so this isn’t unfamiliar territory.

To regulate the mortgage process, the Consumer Financial Protection Bureau added to the underwriting process of qualified mortgages. This new ruling started on January 10th to make the mortgages safer with hidden fees. The qualified mortgages can’t have balloon payments or other surprises, they won’t last 30 years and also will limit costs upfront.

In a qualified loan, your debt can’t go over 43 percent of your pretax income. The lender takes a little bit more care of you, checking that your personal references thoroughly and confirming your ability to repay.

Decision Time

This decision all depends on what the money from a second mortgage on your home in Carlsbad would be going towards – future plans or current income. A licensed planner could help on your financial goals if you’re having trouble making a decision.

By Linda Moore

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