Second Mortgages, Are They Beneficial?

If you are pressed for cold cash to fund an important project, second mortgages could be of significant help. Have you heard of what second mortgages are? 
Second mortgages are secondary loans against your real property’s value. If there is a 
default on the second mortgage, you will have to settle the initial loan first. This is one 
big risk that a private mortgage lender face regarding second mortgages, they are second 
priority to receive full loan repayment amount if the first mortgage is at default. Loans of 
this type are usually taken advantage of by homeowners for a variety of reasons. Most of 
the time they are utilized to help fund an unexpected emergency or to help cover an 
upcoming major expense such as hospitalization or college education.

You can take out a mortgage arrangement as a revolving line of credit or as an installment 
loan. With each type of home loan, the homeowner will need to put up his house or his 
property’s equity as its collateral. If you will opt to have an installment loan, this will 
necessitate you to make repayments for your loan in fixed amounts over a definite amount 
of time. When you have a line of credit for your home, know that it is essentially similar to
 that of a credit card, but is making use of your home’s equity for its security. When seeking 
approval for a financing arrangement, one important factor that will have a major influence on 
this is your home’s equity, but in most cases, a stellar credit score increases the chances 
of a loan application from being approved. This type of loan is ideal for anyone with a dire 
need for a good amount of cash or anyone who needs a huge amount of money but with the
lowest rate possible.

The Qualifications of a Second Mortgage

Different lenders may have their own unique style of assessing a loan application. When 
evaluating a loan application, the homeowner’s job/work history, credit score, and homeowner’s 
equity are put into  consideration before they can even qualify for any kind of loan arrangement. 
It is important for private lenders or lending institutions to see first that a loan application does 
not only have a good credit score but it is also important that they have sufficient equity. If you 
are contemplating on obtaining a loan from a bank, and your credit score falls short of their 
requirement, the next best recourse for help would be the private lenders. It is because they 
tend to put more emphasis and prioritize instead on a property’s equity rather than the borrower’s 
current credit score. The current value of the property in question will be split by the private lender 
with its debts, which will eventually help him to arrive at a metric known as LTV. It  should be at 
least 85% or even less in order to get a mortgage arrangement since they are quite veering away 
from low equity amounts.

If in case, there is a default on high LTV mortgage arrangement, the private lender is running the 
risk of losing his investment. It is true that private lenders prioritize more an equity, but some of 
them will also take into account a borrower’s work history.

The Purposes for a Second Mortgage

You can utilize the money that you can obtain from a second mortgage for whatever purpose since 
you are not limited by anything on what you can do with it. It is under your discretion and your 
decision what you will do with that amount of money that you borrowed. This is one reason why 
most borrowers have a special preference for mortgage arrangements if they need some good 
amount of funds for a major expense or project that they have.

• Paying off Debts - If you are so concerned, troubled by your high loan rates, second 
  mortgages can be of good help. You can opt to obtain another mortgage, a second 
  mortgage and with the amount of money you obtained settle your currently active loans 
  and make repayments at a lower rate.
• Update Debt Payments - A second mortgage can be taken advantage of to settle 
  your currently active loans, so as to avoid penalties for late payments. You can also 
  use this loan arrangement if you want to put your existing mortgage into good 
  standing again.
• Home Renovation and Repair - If you have been wanting to make some major 
  improvements to your home, a loan arrangement secured by your property would 
  be very helpful. Since major repairs and renovations help put more value into a 
  home, some homeowners and property investors are putting it into good use to 
  increase a property’s value. Eventually, they will put the property up on the market 
  to resell it for profit.

If you have been pondering whether or not there is a flexible financial tool that you can take 
advantage of to help cover particular urgent financial need that you have, second mortgages are indeed a fitting option for such kinds of situations.

Fee Agreement with Commercial Mortgage Brokers

We can never fully put so much emphasis on how important it is to have a good
commercial mortgage broker by your side and our fees agreement with him. If
you are a commercial mortgage broker or you are somehow, in one way or another,
have any kind of involvement in this industry you’d understand that professional
brokers for mortgage arrangements nowadays don’t have much of a choice but to
originate their commercial mortgage offerings via the use of the traditional resources
such as from smaller or regional banks.

For many years now, these are the banking institutions that have seen how the
market share in the industry has gradually shrunk in numbers. But only recently,
these sane banking institutions have gained good control as well, which is a good
indication of better things that are to come for the whole industry. A good number
of these banking institutions have never bothered increasing their expected risk
thresholds. They didn’t even bother making any significant change in their underwriting
guidelines in an effort to remain competitive in the market and thus protect as well their
business interest. Presently, these financial institutions, these banks are all reaping the
best rewards that may only come with such kind of prudence they have just displayed.
And they all boil down to one thing only, they still have a good amount of money that can
be put on offer for lending purposes and in many aspects of it, the rates they offer are
considered to be among the best to have in the industry, way better than anything else
offered in the market.

But this also brings to surface something that is a bit of a challenge to mortgage brokers
these days, and this has something to do with these banking institutions not being at all
too friendly to brokers. To be more accurate on this aspect, I would like to put it this way
instead, this has something to do with how the framework of these banking institutions are
built in such a way that it is not at all conforming to work with brokers. Like for instance, you
will seldom find a banking institution that is willing to pay rebates to their clients. There are
rare occasions though that you will stumble upon banking houses that are willing to offer
0.5% or 1% referral fee. But that is it and nothing more to follow that can somehow exceed
that amount. And as mentioned, they are very rare to find.

These banking institutions are in anticipation that you’d be able to get paid on top of the 1%
fee they have on offer. Naturally, the majority of them would want you to have your fee or
make it out of close… do you still remember the last time that you need to chase some
borrower to get your $20,000 commission? If things are not in proper place the first time, then
it comes to follow that you will eventually find it too challenging to collect. Aside from collecting,
you will certainly have a hard time completing the deal.

What I am pointing out here is that besides this current reality in the market, which can never
be fun, if you are under the impression that you will need to take your deals to, say, to one of
the local banks in your area you would need to have your commercial mortgage broker rates
agreement signed. This helped start put everything else in their right places, especially with
the thing you can expect from your mortgage broker. Setting the right expectations will be the
foundation of a fruitful and rewarding working relationship with your broker.

It is important to have this in place already prior to working on the deal with your broker. If you
start the work rolling right away without the agreed fees settled, sticky points may come along
the way. Determining the right and suitable commercial mortgage broker fee is a sensitive task
that should be worked on together so that seamless road can be anticipated ahead.