Good news: the current scenario for second home mortgages is now more relaxed than the previous years. The boom in real estate has made the bank rush on the second home market once again. Thus competition for this area is heightened, which gives the buyers more chances to take on a second home mortgage. Lenders would want to explore the second home market since most people who want to buy one are more affluent and has more capacity to pay.
Here are easier ways to get second home mortgages:
HOME EQUITY LOAN
You could turn your home equity into cash and allow you to finance your second home mortgage. The two types of home equity liability are home equity lines of credit and home equity loans. Both are also called as second mortgages because your first property is given as collateral.
Like purchasing your first home, you must be able to prove that you have the financial capability to buy a second home to may it easier for you to get a second home mortgage. Basically you need to prove that you can afford to pay two mortgage payments.
Example, instead of taking on a 15-year term on your first mortgage, you can refinance it to a 30 year term to lower the monthly amortizations and have excess funds to cover the second home mortgage payment.
A credit score of 700 or higher is a good number for you to increase your chances of getting a second home mortgage without a hitch. A credit score lower than 700 may enable you to take on a second home loan but at the risk of higher interest.
SECOND HOME ON A LEASE
If you rent out your second home, you have to prove to the prospective lender that it will give you ample cash flow, especially if you want to highlight that other source of income in your second home mortgage application.
But many lenders are wary in giving you a second home mortgage if you’re going to lease out your property. They have encountered difficulty disposing of mortgaged properties on lease. You can get a second appraisal for this but this will be costly on your part since you have to show the prevailing occupancy rates. And even though you can prove rental income on lease property as other source of income, your lender might not still take that into consideration.
Taking the above things into consideration, the bottom line is, getting a second home is easy as long as you can pass the 3 C’s of credit:
Character- if you are trustworthy of being given a second home mortgage
Capacity – if you have enough funds to pay an additional loan
Capital – if you have other assets than can be used by lender as payment for your loan in case of payment defaults.
All in all, if you are reasonably credit-worthy, getting a second home mortgage shouldn’t be terribly difficult. Do your homework and due-diligence, mind your credit history and information, and shop around for competitive mortgage lenders and banks.