A second mortgage lets you use your home’s value to gain financial stability. A second mortgage generates capital that can be used to improve the house, pay for medical bills, or other vital financial outlay.
As with many borrowers, you may want to refinance your mortgage with North East as the second mortgage rates are higher than first mortgages. Before you make your final decision, here are steps you should take to make sure refinancing is the right option for you:
Understand How Much Refinancing Costs
It’s important to determine whether refinancing makes sense for you or not. It is beneficial to you financially?
Often, refinancing includes some fees and closing costs. Generally, it can cost up to 6 percent of your loan. Thus, you need to calculate the cost and determine if the savings outweigh the costs. In addition, you must consider your current financial situation. Then, set realistic expectations. Will you have access to enough liquid cash you can use for paying your daily expenses? As refinancing takes some work, you must ensure it’s financially beneficial for you.
Know if You are Qualified
Before you apply for a second mortgage refinancing, check your financial position first. If you have a less-than-perfect credit score, you may need to work on improving it first. Typically, lenders base interest rates on the creditworthiness of the borrower. They will assess the following to determine your eligibility for refinancing:
- Loan-to-value ratio. Typically, lenders, require borrowers to have an LTV ratio of 80 percent or less. But some lenders may lend to those with a 90 percent or higher LTV ratio.
- Credit score. A higher credit score qualifies you for lower interest rates.
- Debt. Usually, lenders check a borrower’s debt-to-income ratio. A ratio that is too high can get your application rejected. Should you be approved, it will be for a higher rate.
Look for a Lender
Make sure to ask a lender if they can refinance your second mortgage with lower interest rates. Otherwise, you may need to find another lender. Compare different lenders and get quotes before you decide. Ensure you pick a lender that is right for your refinancing needs.
Arrange the Paperwork
Generally, you must provide some documents to the lender, so they can assess your debt, income, assets, and equity. These documents can include your bank statements, pay stubs, tax returns, and more. By organising your paperwork, the application process can go smoothly.
