Second mortgages - Troy Bank & Trust Company, Inc

Second mortgages

A second mortgage is essentially a loan secured by your home or another piece of property with an existing first mortgage. A second mortgage allows you to tap into your equity to pay for college tuition, essential home improvements, or to pay off credit card balances or other pressing financial needs.

Because more risk is involved with a second mortgage, our conditions are usually more stringent, the term is shorter, and the interest rate is higher than for the first mortgage.

To qualify for a second mortgage, your credit must be in good standing and you must be able to document your income. An appraisal will be required on your home to determine the home's market value.

By definition, a second mortgage is any loan that involves a second lien on the property, but you generally have two options: a home equity loan or a home equity line of credit.

Both options combine your first and second loan, so your loan will be limited to 75 to 80 percent of your home's appraised value. With a home equity loan, you borrow a lump sum of money to be paid back monthly over a set time frame, much like your first mortgage. However, the closing costs (often 2-3 percent of loan amount) are often higher than your first mortgage and the rate - usually fixed is also higher.

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A home equity line of credit (HELOC) is an open line of credit tied to an equity-based maximum loan amount. You may use the account for a set period of time (5, 10 or even 20 years) as long as there are funds. Once your predetermined time period is up, you will be required to pay off the loan, making monthly payments on the principal and interest. The interest rate can fluctuate month to month on a home equity line of credit, which makes this option appealing when interest rates are low, but risky when interest rates increase.

When deciding what type of loan is best for you, it is important to consider how you will use the money and how you intend to pay it off. Do you need money in one lump sum or intermittent over several months or years? Do you want a fixed interest rate so you can repay your loan in precise monthly installments or would you rather have the flexibility to make any size payment above the interest-only minimum? In todays competitive market, there are many options available. Troy Bank and Trust will help you find the right mortgage product for your lifestyle and financial needs.

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Rates vary daily and are subject to change without notice.

All loans are subject to credit approval, verification, and collateral evaluation. Initial decision is subject to you meeting specific underwriting requirements and final approval will be based upon you satisfying those requirements. Loans originated by Troy Bank and Trust Company.

This information is provided for illustrative purposes only and does not constitute an application. This notice does not guarantee loan approval, nor is it an offer or commitment to make a loan to you on the above terms. The APR, fees, and closing costs are all estimates based on Troy Bank and Trust Companys normal and customary fees and typical tax and insurance costs in the stated property's vicinity.