For people with less-than-perfect credit, this article will show you how to get a second mortgage with bad credit. Are you a homeowner interested in getting an equity loan or a second mortgage but you have bad credit or maybe even bankruptcy on your record. There are companies that have mortgages specifically for homeowners with less than perfect credit. This means that even with damaged credit you may still be able to get a second mortgage or equity loan or refinance your home. We know that these terms get used interchangeably and it does cause some confusion so let’s go over these terms and how you can get a second mortgage with bad credit.
A home refinance is very much like it sounds, your existing loan on your home is completely replaced and you get a brand new mortgage. For example, five years ago you bought a home valued at a hundred thousand dollars and you get a thirty-year mortgage for hundred thousand dollars. Now the interest rates are much lower than what you have we originally got the home, therefore you want to get a whole new loan at a lower rate. You have had the home for a few years so the balance on the mortgage now is ninety-five thousand dollars. So this existing loan is going to be completely paid off and you are going to start all over again with a brand new thirty-year loan for to ninety-five thousand dollars. This is the benefit of obtaining a refinance and mainly what people mean when they say home refinance.
The home equity loan is only for the excess difference between the balance of your current loan and the current value of your home. For example, we are going use that same hundred thousand dollar mortgage that you got five years ago the balance is now $95,000 as it was in the previous example but the home itself is worth $105,000. So the difference between $95,000 that you owe and the $105,000 that your home is worth is a $10,000 difference and that is the equity in the home. So with a home equity loan, you are going to leave that existing $95,000 alone complete in place and you are going to get a completely separate loan for any amount up to that $10,000 that is a home equity loan. Let’s say you have really good credit whoever is loaning you that money may just establish an account that you can go at any time and get up to that $10,000 that’s called an equity line of credit. More details here: https://www.uswitch.com/mortgages/guides/bad-credit-mortgages/
A second mortgage happens if the finance company that gave you that home equity loan files papers at your local courthouse to record a lien against your house as collateral for that home equity loan that they gave you then it becomes a second mortgage. When someone has real perfect credit they may not go and file that lien against them but if you are someone that has some credit issues you may still be able to get that home equity loan because the house itself is collateral and in that case they will definitely go down to record the lien against a home itself. It will officially become a second mortgage.