Most of us have at least heard of the term mortgage but, maybe some of us do not really understand the concept very well so let us take a little closer look at mortgages and how they work.
Generally, the most familiar type of mortgage is the home mortgage. However, it is also possible to take out a commercial mortgage and it is possible to take out a second mortgage on your home or business as well. A second mortgage is basically a second loan that you use your home or business to secure. It also sets you up so that a secondary institution has dibs on your property if you happen to default on that loan.
The primary difference between a home mortgage and a commercial mortgage is that a home mortgage is a loan secured by your home whereas a commercial mortgage is secured with a business. No matter which mortgage you are considering, it is important to note that your home or your business could be at great risk if you default on the repayment of your mortgage, especially if a second mortgage exists as well – in other words, if you miss too many payments, your lending institution is entitled to sell your home or business to repay the loan if you do not for whatever reason.
Another thing to keep in mind about second mortgages in particular is that lending institutions are likely to hesitate quite a lot more about issuing a second mortgage because the second mortgage will take a backseat to the original mortgage – in other words, whoever holds the first mortgage will get paid first if things go badly for you. The other thing is – if you already have a mortgage in place, giving you a second mortgage is much more of a credit risk for the lender.
On the plus side, there are now private funding organizations that are more willing to take risks here and there so you might obtain a second mortgage through one of those. And, private funding companies often have more leeway in the terms they can offer you on a second mortgage or other forms of capital gaining.
Also, if you are absolutely confident that you can repay your mortgage, it is a viable option for helping you with a number of financial difficulties such as paying off large medical bills or expanding your business. You could even use a first or second mortgage on your home to make upgrades and repairs to the home you live in.
If you are considering a second mortgage, remember these things: you are in essence putting your home up against that mortgage and that can be seriously risky to you and your family; mortgages are a workable solution if you find yourself in a tight financial spot; and a private funding company might have much better options for you than a traditional lending institution. If you remember these three things, you will be pretty well informed when you go to actually apply for a mortgage of any kind.