You’ve seen a home you really want to purchase, but you already have a mortgage, will you be eligible for second mortgage loans? When you have a mortgage outstanding, you can be in two minds as to whether or not you’ll be able to buy another home, but it’s not an impossible thought. However, do you know how to buy another house when you have a current mortgage? Maybe it’s time you read on and found out a few of the things you need to know before buying? See more!
A Big Deposit and Excellent Credit
Let’s be honest, second homes or houses are a greater strain on anyone’s finances and lenders are extremely cautious when handing out a mortgage to those who already have one. However, lenders will absolutely be more than willing to offer a mortgage to someone with the ability to pay the second mortgage loans back. First things first, you’re going to require a large deposit. Generally, lenders only require 10% for a mortgage, but with a second mortgage loan, they may require 20% or more. Also, your credit must be in decent shape in order to qualify for a loan.
Ensure Your Debt-To-Income Ratio Is Low
Having a high debt-to-income ratio is going to signal the end of your second mortgage loan simply because you owe more than you earn. For example, you earn around $2,500 a month, but have debts of $1,700 to pay per month, and that leaves very little room for additional debt such as from second mortgage loans. However, if you have a lower debt-to-income ratio of say $1,200 with a monthly income of $2,500, that’s more of an appropriate ratio. The lower the ratio the better so you have to do what you can to lower your ratio; if you have a low ratio then you may be more likely to obtain a loan. For more details, visit: https://www.forbes.com/sites/alyyale/2019/06/07/mortgage-rates-drop-again-homeowners-can-save-hundreds-per-month-by-refinancing/#353b1ace68fe
Know the Purpose of the Second Home
Is the second home going to be your new primary home? Is the home a vacation home? Do you plan to rent the home out when you aren’t using it? What you plan to do with the home, may determine the type of mortgage you’re eligible for. For instance, if you plan on a buy-to-rent house, where you are making income from it, you may not qualify for a standard or traditional mortgage. If the house is going to be a home you plan to move into, then a standard loan may be required. Second mortgage loans aren’t as confusing as it sounds, but you must know why you’re buying the home.
Know Your Options
Buying another house when you have a mortgage outstanding isn’t as difficult as you might think, or even as confusing. However, second mortgages aren’t exclusively for homes you own, you can get a second mortgage for a second property. There are many great options to consider when it comes to purchasing a home, and second mortgage loans can work to your advantage if you want them to.