Second Mortgage Cost and Length

Second mortgages can be a good way to receive credit by using your home as collateral. However, when second mortgages are obtained, you may incur some extra costs. You may also have to make important decisions about other aspects of the second mortgage, including the mortgageýs length.

Mortgage companies routinely charge lending fees when you secure a second mortgage from them. These fees are most often measured in points, which are equal to one percent of the amount you are borrowing. For example, if you were to borrow $10,000 and your lending fee was five points, you would have to pay $500. The amount of points charged is different at every mortgage company, so comparison shopping is a good idea in this area. Remember, if your fee seems too high, you may be able to find a lower fee elsewhere.

It is also important to get the amount of the lending fee in writing. Lending fees on second mortgages are limited by law in many states, so make sure you are not charged a fee that is improperly high. You can check with the consumer protection office or banking commissioner in your state to find out if there is such a limit in effect, and if so what the limit is.

The length of second mortgages can vary dramatically. Some may last as much as 20 years, while others can be due in only one year. You should discuss the available repayment times with the mortgage company you choose to get the one that is right for your needs. For example, you would not want a one or two year repayment period if you are borrowing $20,000 to pay your loans, because the monthly payments would likely be far too high.

Always remember when seeking a second mortgage that you have options on many of the terms available. You should comparison shop both between companies and plans offered by companies to find the mortgage that fits your needs.