When a project germinates in our mind and we do not have the necessary funds to carry it out, the mortgage is generally a simple and effective option in this regard. However, it sometimes happens that, for various reasons, the credit rating is so bad that a loan is hardly granted to us. It therefore goes without saying that obtaining a second mortgage would be even more difficult… How to go about it?
What is it for?
In fact, the second mortgage is a secondary loan in order of priority, after the first one that was taken out for the same building. This second loan can also be applied to another building that you own or rent, such as a cottage. In all cases, you must know how to respect your financial objectives and your real needs, to avoid getting into unnecessary debt. In addition, the loan on a second mortgage provides multiple advantages, starting with the possibility for a borrower to buy a higher value property, such as a more expensive house, or even children’s studies, or even major renovations.
In addition, in the case of purchasing a second property, the second mortgage could be used to consolidate debts, that is, to repay high-rate debts, so that we can concentrate our efforts on paying off a single, lower-rate debt. The second mortgage is generally granted when the borrower meets certain conditions. Among these, the property in question must be a residential or commercial building, and the current loan amount must be equal to or less than 75% of the total value of the building. But what if the credit rating is not optimal?
Bad credit: no loan?
Generally, it is more difficult to get a mortgage when your credit score is low. But it is not impossible! In reality, when a loan application is made, lenders check the amount of the down payment, the annual household income, late payments and the credit score, among other things. The closer the score is to 900, the better the credit and the greater the chances of getting a loan. Conversely, the lower the credit score is, the score is considered poor. If this is the case, it is possible to consider other options, such as a subprime second mortgage. This is primarily intended for borrowers who do not meet the requirements for a good credit score, past bankruptcies or credit problems. This type of loan has a term of approximately two years and higher rates. This is a support option for quickly obtaining a second mortgage while we work to improve our credit history.
Once your credit rating is in good shape, a traditional second mortgage could be considered. To improve this rating and thus improve your financial situation, you should reduce your credit utilization rate, manage your debts responsibly, but also save enough so that the down payment is larger. Furthermore, it is essential to mention that the second mortgage does not appear on the credit report, since it generally consists of interest. Then, for more information, do not hesitate to consult a financial institution specializing in this field.