Yes, while it is difficult to be approved for a second mortgage while paying off your first, it is possible to have two mortgages simultaneously.
What is a Second Mortgage?
A second mortgage is a loan you take out for a property you already have a home loan for. Basically, a second mortgage means one property will be security for two different home loans. In addition, your second mortgage is less of a priority than your first mortgage. Meaning, if you default on your mortgage repayments and your property is sold, the profit will be used to pay off the first mortgage before any money is put towards the second one. Therefore, if you default, you could end up paying a lot of money towards the second home loan.
Why Do People Take Out a Second Mortgage?
While refinancing an existing mortgage is a better, less risky option, there are some instances where a second mortgage would be more beneficial:
- You want to access some equity, but your existing lender won’t approve you for a larger loan amount.
- You want to access some equity, but your existing mortgage is a fixed-rate loan. Not only will you have to pay exit fees to refinance, but your new interest rate may be higher than your current fixed rate.
- You are acting as a guarantor for someone else’s home loan. This is one case where applying for a second mortgage may actually be easier than usual because the additional mortgage will provide extra security for the bank.
If you have questions about a second mortgage or need to apply for one, Mortgage House can help answer any questions you may have and find you a loan with a competitive rate.
