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Most people that obtain a mortgage loan against another property usually plan to buy a second house. This means that they are not ready to sell or move out of their existing place of residence, but they wish to have a second house that they can occupy later, use as a vacation retreat or as an income property. A mortgage loan secured against another property is known as a second mortgage.
A second mortgage on another property is also a long-term loan in your name against the home you intend to buy. It is worth noting, however, that this mortgage differs from a secured charge mortgage or remortgage.
Benefits of securing a mortgage loan against another property
- The advantages of going for a second mortgage is that it is separate from your current mortgage. Therefore, your existing property is not at direct risk.
- A second mortgage could be a cheaper loan when compared with second charge mortgage or secure loan
Drawbacks of securing a mortgage loan against another property
- One of the disadvantages of acquiring a second mortgage is that it requires a second deposit.
- Paying for two mortgages at a time can be quite expensive.
- Affordability checks of the second mortgage are stringent.
- Going for a second mortgage may put your current apartment at an indirect risk. Meaning that you might have to sell your existing home to cover the repayment of the second mortgage.
How to secure a mortgage loan against another property
You must be aware of the fact that you will be subjected to stricter affordability checks when applying for a second mortgage. A second mortgage is much harder to approve because of these measures. You have to get all your documents ready, especially those that will prove that your income can cover the cost of two mortgages.
Apart from getting your documents ready, try to minimize spending well before tendering your application for a better chance. Also, it is essential that you make a comparison across the market to know the right deal for you. Another trick to improve your chances of getting your second mortgage approved is by repaying the first mortgage as quickly as possible. Decide on what you want to do with your second home as this will affect your mortgage.
Are you planning to secure a mortgage loan against another property? Check out the tips given above. They will help you get your application approved whenever you decide to go for a second mortgage. Your real estate agent may have special relationships with mortgage brokers or lenders in your area, talk to them for additional advice.