Can you actually get a second mortgage with no equity? Is it possible to get a second mortgage against your home without having built up any equity? When should you get a second mortgage if you have no equity?
You can get a second mortgage with no equity. It is referred to as a 125 second. This is when they use 125% of the value of your home to get you the financing you need. Usually, you have to have a good credit rating and a low debt to income ratio in order to get a 125-second mortgage.
A second mortgage is what I refer to as a band-aid loan. This is a loan that is used to temporarily fix a situation until a better solution can be found. You should never get a second mortgage when you can refinance your first mortgage. When you have already done this and used up 100% of the value you have no choice, but to take out a second mortgage.
When you take out a second mortgage for 125% of the value of your home you need to have a plan. You need to have a plan that will allow you to get through the desperate time that you are in, and come out in a better place. You want it to only be temporary. It is not a good thing to get used to having your home financed at more than it’s value.
Use this advice in order to make a sound decision in your financial situation. Remember that even when you are desperate you still need to compare rates and fees in order to get the best deal possible.