Second Mortgage Loans
While business loans may be beneficial for some businesses,
there are other options available. If you are a home owner as
well as a business owner, and find the need for a loan for
business purchases or expansion is in your horizon, consider a
second mortgage loan
Advantages of Second Mortgage Loans for Business
- The interest rate on a second mortgage loan may be tax
deductible. Often, the interest from a second mortgage loan can
be deducted each year through itemization on federal income tax
forms, and this may also carry over onto state income taxes,
depending on the state in which you reside. Consult with your
financial institution and tax preparation person or agency to
verify.
- The money may be readily available with a second mortgage
loan. Especially if your credit rating is good, and even if it's
not, the money is certain to be there to borrow provided you
have equity in the home. Since home and property values continue
to increase annually, it would be a rare instance for equity not
to be available, especially if you have not recently borrowed
against the home.
Secured loans, such as a second mortgage loan, are generally
easier to obtain than a signature loan or a business loan, both
of which can also offer a higher interest rate. Borrowing money
against your home assures the financial institution that if the
loan is not paid, they will have something to fall back on,
namely, your house.
Disadvantages of Second Mortgage Loans for Business
- The interest rate on a second mortgage loan is generally
higher than on a first mortgage. Interest rates may vary, so
consult with your financial institution to learn about current
rates for a second mortgage loan. Rates will also vary according
to your credit rating. If credit scores are high, interest rates
will be lower. Lower credit scores will mean that a higher
interest rate will be effective for your second mortgage loan.
- Closing on a second mortgage loan may be a time-consuming
process. It's safe to estimate that obtaining money from a
second mortgage loan can take one to two months, even if your
credit rating is good. In order to get a second mortgage loan,
there are a few steps involved that must be completed before the
check can be cut.
First, preapproval must be completed to get a second mortgage
loan. A second mortgage loan requires a full home loan
application, which is generally several pages long. Upon
receiving the second mortgage application, the financial
institution will issue preapproval for the second mortgage loan,
and will require the home be appraised by a certified home
appraiser.
An appointment with an appraiser will be set, and the appraiser
will visit your home, take measurements of rooms, the property,
and the outside of the home, and may also take photographs. The
appraisal may take an estimated five to ten business days to
compile, and will include detailed information about the home in
an appraisal report. It is then submitted to the financial
institution. At that point, the loan can be approved for the
amount of equity in the home, or if less money is needed, the
loan will be written for the amount you've requested. Loan
papers can then be generated, which can take several more days,
and closing on the second mortgage loan will be completed when
all has been completed.
A second mortgage loan, depending on credit scores, can be
written for up to 100 percent of the current value of the home,
with consideration for the first mortgage as well. In some
instances, a second mortgage loan can be issued for more than
100 percent of the home's value.
The most important thing to remember with a second mortgage
loan is to stay current on payments. Like a first mortgage,
credit ratings are deeply affected if payments are not made in a
timely manner. This can affect your ability to obtain credit in
the future, and can jeopardize your home ownership. All factors
need to be carefully weighed prior to signing for a second
mortgage loan or any other type of loan.
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women. Visit her site:
Loans for
Women
http://loans.digital-women.com
