Adjustable Rate Refinance - Second Mortgages

Second Mortgages

Despite, the ongoing American love affair with second mortgages, obtaining a second mortgage can actually be bad for us. Here are some pointers from the Federal Trade Commission (FTC):

Do not agree to second mortgages if you do not have enough income to make the monthly payments. You could go into default very quickly and lose your home, and adjustable second mortgages will leave you completely unprepared for any rate changes.
No home mortgages' document should be signed if there are blank spaces to be filled in after you sign.
Do not agree to second mortgages that includes credit insurance or any added products that you do not want. You may want to shop around for the best credit insurance rates if it is a required condition of the loan.
Do not deed your property to anyone. Consult a lawyer, a knowledgeable family member or a friend that you trust.
Keep careful records of what you've paid, including billing statements and canceled checks. Be sure and challenge contested or inaccurate charges.

Second mortgages can be harmful to your financial well-being

When getting second mortgages it is important to read over everything very carefully. Sometimes, lenders will include all sorts of conditions and fine-print that is advantageous to the lender - but everything is negotiable. For example, pre-payment penalties are not uncommon but if you ever want to consider refinancing try to bargain away that penalty. If you want to pay off your loan early, you should not have to pay a 10% fee to do so! With second mortgages - and mortgages in general - you can have your rate increased for missing a payment or for just being late. Avoid late payements because it could cost you plenty.

Breaking down equity affordability

Whether you need bad credit second mortgages or mortgages against equity you might not yet have, there is a better way to search for a second mortgage - affordable second mortgages do actually exist:

Make sure you get an advantageous rate. They'll be higher than your first mortgage, but if you have the equity - and if you have a valid plan for using that equity - low rates are almost a certainty.
When you can, try to secure fixed rate second mortgages rather than risk an adjusting rate. Unfortunately HELOC's only come in adjustable rates, but the standard second mortgage can come in a fixed form.
If you don't have the equity, don't borrow! The days of 125% equity financing are over when rates increase and home prices stagnate - which is exactly what's happening so don't over extend your finances.

Be careful with your equity, and be sure you can afford the costs of home equity financing.

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