To get a second mortgage loan, ensure you have sufficient equity in your home, and compare rates and fees from banks, credit unions and mortgage lenders, says About.com. You must also have a sufficient credit score as well as the income to meet the extra payments, explains Bankrate.
Second mortgage loans come in two variations, says Bankrate. The first type is a home equity loan that functions like a regular mortgage. The second type is a home equity line of credit that functions similarly to a credit card. This type carries variable interest, and the amount of money a homeowner can access depends on the amount of equity in the home.
It may be easier to obtain a second mortgage for purposes such as home improvements, higher education costs, emergency medical care and debt consolidation, says About.com. Homeowners should make room in their budgets for common costs that come with taking out second loans. These include appraisal fees, points, application costs and closing costs such as title searches.
Second mortgages sometimes come with hefty default penalties for late or missed payments, explains About.com. Try not to go with lenders imposing such penalties, and avoid prepayment penalties as well. Examine the contract for balloon payments and unnecessary voluntary insurance policies.