Your home is a big purchase – you are looking at a commitment to repaying it over about 20-30 years. The home is also a big asset and, once you have built up some equity, you can borrow against this asset to help finance your dream lifestyle. In some cases, it makes sense to get a second bond – read on for ways to make it more likely that you will get one.
Ask yourself what the reason is for applying for the further bond and whether or not it is a good one. You are, essentially, putting your home on the line as collateral – is it really worth risking it? Is the equity in the home enough to make it worthwhile to borrow against the bond? Does your credit score need work before trying for a second bond?
Make very sure that you are in a position to pay the new repayment amount on a monthly basis. Run a search engine search for mortgage calculators and plug the statistics in there to see what your repayment will be.
Bring in a trained appraiser to see what the home is actually worth. Keep the report to give to the bank when you put your application through.
Find out what your lender needs to process your application, what they are going to charge you and if you need any additional insurance or not also. Get everything together.
Do your homework – will another lender offer you a better deal. Would it be better to look at refinancing? Discuss your alternatives with your lender and see what they suggest. Refinancing may land you a better deal in terms of interest – the interest rate on a secondary loan is always higher. (The secondary lender takes a bigger risk, especially if the house is foreclosed on.) Weigh up the alternatives carefully before deciding on one option or the other. Visit lacve.com to find out more.
There are advantages to a home equity loan as well – there are no further tax or insurance payments. You may even get a better deal on the closing fees. Dealing with the bank that holds your first mortgage can be advantageous in terms of convenience, interest and saving on charges, etc.
You do have a duty to be a responsible lender though – are you 100% certain that you will be able to meet the monthly payments? Also try not to borrow to 100% of the value of the home – you could be in a difficult situation if you have to sell in a hurry.