A Second Mortgage May Be The Only Way For You To Get Good Interest Rates For Refinancing

When you find yourself in deep debt in the current economy

, finding a way to manage your debt can be an overwhelming process. It doesn't matter how you got into this situation, you need to find a way to refinance your debt into an affordable monthly payment plan. But credit card interest rates are too high, personal loans are unobtainable for most, and unsecured lines of credit are only available for a select few people with high credit ratings and no debt. You need to find another way to refinance your debt.

The Caveat

A second mortgage used to be a popular means of managing debt at low interest rates. It was easy to obtain a second mortgage for a couple of decades. Being secured debt in what was thought to be a predictable asset industry, the interest rates on second mortgages are significantly less than the interest rates on long-term personal loans and credit card interest rates. As a secured type of debt that was considered relatively safe by lenders, a second mortgage was thought to be a good solution for everyone involved.

The problem for lenders is that the second mortgage takes a back seat to the primary mortgage when it comes to liquidizing your loan-securing assets and dividing up the cash. When real estate generally went up in value and home mortgages were generally for a lesser amount than the value of the real estate, all of your lenders had adequate assurance of repayment. But in recent times, real estate values have been volatile and many mortgages are outstanding for lower-value real estate. As a result, lenders are now extremely resistant to providing second mortgages.

Who Can Get a Second Mortgage in These Times?

The good news is that while various types of loans are becoming more difficult to obtain and are coming at increasingly higher interest rates, the availability of second mortgages has stabilized. While second mortgages are no longer available to those with more debt than equity, most people who have owned their own homes for 10 to 20 years have far more equity in their homes than remaining debt secured against their homes. Lenders are looking specifically for people in these situations, as the lending risk remains low. In turn, this means if you're in this situation, you probably qualify for a second mortgage at a competitive interest rate, even if you've piled up a significant amount of debt.

by: Espen Nueva

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