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Move And Mortgage

Are Second Mortgages Too Expensive?

In Need of Finance?

Finance can be demanding at times and having an urgent need of liquid cash can put anyone at stress. Its need can arise anytime out of uncertainty. Sometimes for good causes or even during the bad times. There are plenty of options for urgent financing and meeting your requirements though most of them require gruesome paperwork and formalities. This adds to the amount of time it consumes before you can actually get your hands on the money to meet your needs. 

One option for quickly getting money is to mortgage your property. Mortgage refers to obtaining a loan against the title ship of your property. Banks and financial institutions offer this facility at competitive interest rates for people who are seeking loans against their properties. Let’s learn more about it!

What is a mortgage?

Mortgaging refers to the act of obtaining a loan against your property by surrendering the ownership documents of your property to the bank for the duration of the mortgage. On successful repayment, the bank returns the title ship of the property. Basically, in a mortgage, your property serves as the collateral or guarantee for repayment. This makes it the easiest way of obtaining a loan as no proof of income or other credit supporting documents are required.

Documents Required for a Mortgage

Documents that are required and should be submitted along with the mortgage application form include the following:

● Proof of Identity

This refers to a proof of identity and ideally it has to be a photo identity. A driver’s license or passport works as the best form of this. So a xerox copy of any of them will work for you.

● Proof of Residence

Proof of residence is the proof of where you stay. It can be your passport or driving license as they usually have your address mentioned. Apart from this, utility bills can too serve as residence proof.

● Bank Statement

The bank will require at least 3 or 6 months bank statement to verify it for your income proof.

● Salary Slip

This is essential for those individuals who are into jobs. It serves as a proof of their income and their credit ability to repay.

● Income Proof

For those who are self-employed or into business, they will have to submit other forms of income proof. This can be a tax return or business revenue proof.

● Existing EMI

If you are already paying an EMI for a loan then the details regarding the same need to be presented to your banker to assess how much money you can borrow.

What if you need more money?

You have already mortgaged your property and obtained a loan against it. But due to some circumstances, you require additional money. Usually, people at this stage go for second mortgage. This means to obtain another loan against a property which has already been mortgage. Though it is a popular practice yet its idea is dying due to the various demerits attached to it. Let’s check them out.

Demerits of Second Mortgage

● Risky

Second mortgage aren’t safe and poses the risk of failure to repay. Though their interest rate is lesser than credit cards, they still add to the overall burden of paying two loans on a same house every month.

● Higher Interest

Second mortgages comes at an additional interest which gets added with the interest you are paying on your initial mortgage. This makes the interest rates too high and can make it hard to repay back.

● Credit History at Stake

In case of non-repayment or failure to repay back the loan, the credit history of the debtor gets ruined. He is blacklisted and no bank will finance him a fresh loan for a long period of time before his credibility is proven.

● Chances of losing house

If things don’t turn out to be in favor, chances are that a second mortgage may actually take you closer to losing your house. The bank will acquire your property for the sole purpose of auctioning in case of failure to repay the loan.

Alternatives to Second Mortgage

Bridging Loans - These are loans that are raised for the purpose of selling properties and buying new ones without mortgaging. One can raise a short term loan ranging from a few days to a few weeks and then buy the new house using that money. Once shifted, the old house can be sold to pay back the bridging loan in full.

Harwood Quick Sell suggests to go for alternates of second mortgage and to completely avoid second mortgage under any circumstances.


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  • Are Second Mortgages Too Expensive?

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