Understanding Costs for 2nd Mortgages

Understanding the Cost of a Second Mortgage Loan

You wouldn't fill up your car's gas tank without knowing the cost, would you? The same goes for second mortgages. Here are some tips to you understand the price of your loan.

There are two major costs for getting a second mortgage: banker fees and loan interest. Fees and closing costs are paid upfront, at the time of signing. Interest is paid over the entire life of the mortgage.

Lender fees

A homeowner can expect the same fees for a second mortgage as would come on a first mortgage. For example:

* Appraisal
* Application fee
* Credit report fee
* Attorney costs

But these fees are likely to cost less than a full-blown mortgage. According to lending information website Bankrate.com, the fees usually total two to five percent of the loan balance.

Some of these fees are fixed; costs regulated by the government or other institution. But some fees are negotiable, such as the application fee.

The Cost of Money

Interest is often called the cost of money. Interest is how banks, lenders and financial institutions make the lion’s share of their money.

Second mortgages are a fixed rate loan. This means that the interest rate you agree to at signing is the interest rate you will pay for the entire life of the loan. The fixed interest rate that you get on your loan depends on a bunch of factors, including the length of the mortgage, supply and demand and the interest rate environment. Most lenders compete to offer the best rate, but it is still wise shop around.

More information on the cost of a second mortgage can be found at www.bankrate.com or www.lendingtree.com.

From http://efinancedirectory.com