Second mortgage on your house
A second mortgage is a mortgage that you close beside your current mortgage. You close a second mortgage in order to create financial room for renovations, increasing the sustainability, or perhaps to realize that one big dream you have.
The condition for closing a second mortgage is having a surplus value on your house. Is the current mortgage debt lower than the appraised value of your house, than we speak of surplus value. Such a surplus value is the most important condition to request a second mortgage.
Together with your financial advisor, you can research the kind of financial room you can create with the help of a second mortgage.
Interest margin (surcharge)
The second mortgage on your house increases the default risk of the bank. They would like to be compensated for this increased risk through higher interest rates. The extra percentage of interest that the bank charges is called: interest margin (surcharge). Check with your financial advisor how much more interest you will pay with the extra mortgage.
For what reason will I use a second mortgage?
With a second mortgage you ‘redeem’ the surplus value of your house. If you have a house with a value of, for instance, € 400,000 and with a mortgage debt of € 250,000, then there is a possibility to get a surplus value of € 150,000 on your house.
The surplus value can make dreams come true. Beside an improvement or reconstruction of your own home, there is also a possibility to purchase a vacation home at your favourite destination, domestic or foreign. Or perhaps you would like to help your children buying their first house. Or perhaps the purchase of a house to rent out. It is also possible to use the surplus value to decrease your monthly costs or to invest looking for a nice return.
Which mortgage as a second mortgage?
A second mortgage can only be closed if you already have an outstanding mortgage on the house you live in. So the second one is extra. For the second mortgage you also use your own house as collateral regardless of the purpose of the second one.
Where do I close a second mortgage?
A second mortgage is often closed with the same bank or provider as the first mortgage. Few mortgage providers offer a loose second mortgage, the risks are just too great. Providers who do offer loose second mortgages, ask higher interest rates to compensate for the high risk. In the case that you do want to close with another provider you can look, together with your financial advisor, at the possibilities of refinancing your mortgage.
Types of second mortgages
If you choose to use your second mortgage for something else there will be more types available. Even interest-only mortgages are possible. In these cases the interest of your mortgage is not deductible. Ask our advisors to make a list of all the possibilities and to calculate the best result for an advice.
Calculate the second mortgage
The amount that you can get with the second mortgage can be made insightful with an independent financial advisor. Factors that play an important role in the calculation are: your income, current interest rates, your maximal mortgage costs, your current mortgage costs, and the purpose of the second mortgage.
Advice and notary costs
There are costs for the independent financial advice, the appraisal of the current house, and for drawing up the mortgage deed by the notary. These costs need to be in comparison to the purpose of the extra mortgage. Together with your advisor you can consider these costs before making a final decision.
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