A second mortgage is also known as a home equity line of credit, and it’s basically a lien on a property that is known to be subordinate to a previous, senior loan. The second loan uses your home as collateral, and as your home gains value over time, a second loan you might get will be considerably higher.
Second loans can come in one of two different forms:
- Lines of credit are one possible option, allowing you access to a pool of money that you will draw from. You’ll have a maximum amount you can borrow, and as with credit cards, you can borrow multiple times until you reach your limit, then pay off your credit, and borrow again.
- The most common choice is to get your money as a lump sum. This standard second mortgage can be used to any end you want, and it usually involves fixed monthly payments that require you to pay an amount of the balance along with a part of the interest rate with each payment.
As with most types of loans, you can get a fixed or variable interest second loan. While the latter is somewhat more unpredictable, it can lead you to lower interest overall, and it’s also the standard option for lines of credit. Fixed rates, on the other hand, will give you the option of planning your payments accurately for years to come.
Contact Ideal Home Loans to see what the current Denver mortgage rates are for first time buyers or second mortgages.