In this article, we’ll look at short-term second mortgages – what they are, how they work, how you might use them, their benefits, and what to consider when you are applying for one.
When you have equity in your property and need access to funds quickly, a short-term second mortgage can be a good option in the absence of not being able to extend or refinance your first mortgage.
A second mortgage is essentially a second loan that’s in addition to the primary (first) mortgage, secured against your property. Also known as a second lien, or secondary registered interest, it uses the equity you have in your property and, once established, means you will have two mortgages against your property.
Traditionally, second mortgages were like first mortgages, in that they were for very long periods of time (sometimes decades). However, in Australia, the rise of non-bank and private lenders has opened up the options for borrowers – in particular, offering short-term second mortgages that typically have a term from two-to-36 months. Short-term second mortgages are an increasingly popular alternative for both personal and business funding requirements.
For mortgage providers, a second mortgage means they are second in line to be paid, after the first mortgage is paid, so their risk is somewhat larger. This can be an important factor in being approved for a second mortgage, and the cost (interest rate) applicable to the loan.
A second mortgage is very similar to a first mortgage, in that it is secured against your property. Importantly, mortgage providers will consider the total loan-to-value ratio (LVR) of both the primary and secondary mortgages in evaluating the loan for approval.
Second mortgages tap into the equity that you have in your property. This will increase over time as you make payments and reduce the principal, and/ or with increases in the property value. This additional equity can then be ‘released’ via a second mortgage loan.
You can apply online for a second mortgage with a range of lenders, and once approved, the loan may take the form of a lump sum (one-time loan) or a line of credit (available to be drawn upon as the need arises).
There are a variety of reasons why you might consider a short-term second mortgage to access funds for a limited period. These include:
If you have solid equity in your property, and need access to additional funds relatively quickly for short-term personal or business use, there are a range of benefits to choosing a short-term second mortgage:
If you have equity in your property and need short-term funds for personal or business use, Mango Credit makes it easy to apply online for a short-term second mortgage.
While there are many benefits to using a second mortgage for access to short-term funds, there are some important areas that should be investigated before applying for a loan, to include:
When you have equity in your property and need access to funds quickly, a short-term second mortgage can be a good option in the absence of not being able to extend or refinance your first mortgage. You can apply online through an increasing number of mortgage providers, including non-bank and private lenders, to access to funds that can be used for a variety of personal or business uses.
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