Ditech : When Is A Second Mortgage Loan A Good Idea?

A second mortgage loan is a loan taken after the first mortgage, with the property used in the first mortgage as collateral. A second mortgage loan allows you to borrow the money you need without needing another property to secure it.

In the past, a second mortgage loans was considered a sign of financial difficulty. After all, why would you need to take out a second loan on property that is already being used as collateral? Accordingly, it used to be difficult to get a second mortgage loan. It was viewed by credit institutions as being too risky. Nowadays, however, second mortgage loans are quite easy to get.

Second mortgage loans usually carry higher interest payments that first mortgage loans. Perhaps the only reason you should consider a second mortgage loan is when the interest payable is well below the prime lending rate. Unless is condition is met, refinancing your home might be the better option.

All mortgages, whether first or second, carry a certain amount of risk. Because you are putting up your property up as security for the loan, you should exhaust all efforts to find the best deal possible. Be sure you study your financial situation before making a decision.

Ditech : Refinancing Your Home Loan - Should You Use a Mortgage Broker?

Mortgage brokers can be an excellent resource for refinancing your mortgage, especially if you have less than perfect credit. The problem with using a mortgage broker is that it is very easy to overpay thousands of dollars in unnecessary fees and mortgage interest. Here are several tips to help you decide if refinancing with a mortgage broker is right for you and avoid paying too much for your new mortgage.

An experienced mortgage broker has extensive connections with a variety of mortgage lenders. The problem with taking advantage of these connections is that it comes at premium expense; mortgage brokers are paid on a commission basis. To make matters worse, the more expensive the loan package that your mortgage broker places you in, the higher their commission. Here’s how a typical transaction with a mortgage broker works.

Your mortgage broker submits your application for mortgage refinancing to a wholesale mortgage lender that approves your loan at a specific interest rate. The broker receives a rate sheet from the wholesale lender and then marks up that interest rate to receive a commission from the lender. This commission is in addition to the origination fee you are already paying the mortgage broker for arranging your loan. Basically, what’s going on here is that you are paying the broker twice for the work they do on your loan.

This markup of your mortgage interest rate is called Yield Spread Premium; if you unknowingly agree to pay it, this will cost you thousands of dollars unnecessarily each year. How can you avoid paying this unnecessary markup of your mortgage interest rate? You can learn this and other costly mistakes you need to avoid when mortgage refinancing with a free mortgage tutorial.