Second Mortgage Loans
Rebecca Game
While business loans may be beneficial for some businesses, there are other options available. If you are a home owner as well as a business owner, and find the need for a loan for business purchases or expansion is in your horizon, consider a second mortgage loan
Advantages of Second Mortgage Loans for Business
- The interest rate on a second mortgage loan may be tax deductible. Often, the interest from a second mortgage loan can be deducted each year through itemization on federal income tax forms, and this may also carry over onto state income taxes, depending on the state in which you reside. Consult with your financial institution and tax preparation person or agency to verify.
- The money may be readily available with a second mortgage loan. Especially if your credit rating is good, and even if it's not, the money is certain to be there to borrow provided you have equity in the home. Since home and property values continue to increase annually, it would be a rare instance for equity not to be available, especially if you have not recently borrowed against the home.
Secured loans, such as a second mortgage loan, are generally easier to obtain than a signature loan or a business loan, both of which can also offer a higher interest rate. Borrowing money against your home assures the financial institution that if the loan is not paid, they will have something to fall back on, namely, your house.
Disadvantages of Second Mortgage Loans for Business
- The interest rate on a second mortgage loan is generally higher than on a first mortgage. Interest rates may vary, so consult with your financial institution to learn about current rates for a second mortgage loan. Rates will also vary according to your credit rating. If credit scores are high, interest rates will be lower. Lower credit scores will mean that a higher interest rate will be effective for your second mortgage loan.
- Closing on a second mortgage loan may be a time-consuming process. It's safe to estimate that obtaining money from a second mortgage loan can take one to two months, even if your credit rating is good. In order to get a second mortgage loan, there are a few steps involved that must be completed before the check can be cut.
First, preapproval must be completed to get a second mortgage loan. A second mortgage loan requires a full home loan application, which is generally several pages long. Upon receiving the second mortgage application, the financial institution will issue preapproval for the second mortgage loan, and will require the home be appraised by a certified home appraiser.
An appointment with an appraiser will be set, and the appraiser will visit your home, take measurements of rooms, the property, and the outside of the home, and may also take photographs. The appraisal may take an estimated five to ten business days to compile, and will include detailed information about the home in an appraisal report. It is then submitted to the financial institution. At that point, the loan can be approved for the amount of equity in the home, or if less money is needed, the loan will be written for the amount you've requested. Loan papers can then be generated, which can take several more days, and closing on the second mortgage loan will be completed when all has been completed.
A second mortgage loan, depending on credit scores, can be written for up to 100 percent of the current value of the home, with consideration for the first mortgage as well. In some instances, a second mortgage loan can be issued for more than 100 percent of the home's value.
The most important thing to remember with a second mortgage loan is to stay current on payments. Like a first mortgage, credit ratings are deeply affected if payments are not made in a timely manner. This can affect your ability to obtain credit in the future, and can jeopardize your home ownership. All factors need to be carefully weighed prior to signing for a second mortgage loan or any other type of loan.
About the author:
Rebecca Game is the founder of Digital Women ®, an online community for women in business. A 30 year entrepreneur and dedicated to helping other women. Visit her site: Loans for Women
http://loans.digital-women.com
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