Second mortgages in Secured Home Loans in West Auckland
In the last five years, banks and other mortgage lenders have seen a huge increase in the demand for a second home loan, as borrowers are attempting to benefit from the value in their personal homes. The reduction of costs combined with the spiraling value of the properties in West Auckland, has raised the value of numerous properties. For many people, especially those who have lived in their home for a few years, they now have additional capital or equity that they could draw on for other uses. To do this they need to take out either a second mortgage or secured home loan.
What is a second mortgage or secured home loan?
A second mortgage is often called a secured home loan because it is a loan which is secured against the value of the property. This is not the same as remortgaging where you change the terms of the mortgage on your home. With a second mortgage, you retain the first mortgage but then take out a second loan.
You might choose this route if you have a favourable fixed rate mortgage. For example, if your fixed rate is more competitive than new fixes, then it would not make sense to redeem that and take out a more expensive loan. However, you may have a need for capital which you could access by taking an additional mortgage or loan facility.
Why do people in West Auckland take out a second mortgage?
There are many reasons people take out a second mortgage. A common one is to renovate their home or add an extension. If your family has grown this could be a lot cheaper than moving and will also add capital value to your home.
You may want to invest in a rental property. You can use the equity in your personal home as the deposit for that investment property.
Your children may want help with a deposit for their first home so you can take a second mortgage and use that capital for the down-payment.
Of course many people also take a second mortgage to clear more expensive debt like credit cards or car loans. However, be aware that while the short-term monthly payments may be less with a second mortgage, over the life of that loan which may be 25 years, you could end up paying far more than paying off your debts from your income.
Considerations for a second mortgage
If you are thinking of obtaining a second mortgage on your home, there are a few things you will have to take into consideration before making a decision:

The interest rates on second mortgages

A second mortgage usually attracts higher interest rates than those that are paid on first home loans. The reason is that lenders believe that a second mortgage represents a higher risk which can be offset by a higher interest rate
This higher risk is due to the fact that second mortgages are actually an added charge on the property. To be clear, in case you will be unable to pay and your house will be repossessed, the lender with the first home loan will actually get the house so he can reclaim their money. The second lender will have to wait until the property is sold and is running the risk of never recovering their loan, or in the best case scenario, just a small part.

Lending criteria

Banks have different criteria for lending a second mortgage. Some are more risk averse and will place much higher constraints on borrowers. So even if the house has sufficient equity in it, they may still not want to lend you the money. So if you are declined by one lender, ask another who may be more willing to provide a secured home loan for you. .

Can you afford the repayments?

This is probably the most important consideration for any lender. So you need to be able to show that you can afford the repayments on the second mortgage.

Different types of second charge mortgages

It is important to know that there are a few types of second-charge home loans available on the market. It can be quite complex so it is best to seek mortgage advice from a broker who specialises in second mortgages in West Auckland.