Not all banks and loan companies offer 2nd mortgages, so we why not let RefiGuide help you find the best second mortgage lenders and brokers that specialize in this unique niche market of home equity and subordinate financing. Try walking into your favorite bank or neighborhood credit union and obtaining a low rate home equity loan, cash out refinance or credit line with average homeowner credentials.
Meet Trusted 2nd Mortgage Lenders with Loans for Cash Out, Debt Consolidation and More.
Today, you will find the most competitive equity loans and HELOCs online from the best second mortgage lenders, banks, brokers and credit unions in the country.
The RefiGuide works with over 25 home equity lenders, including most of the largest banks in the United States.
These 2nd-mortgage brokers and lenders specialize in a diverse home equity loan programs nationwide.
We will introduce you with top lending companies across the country so you find the best 2nd mortgages rates on fixed loans HELOCs that meets your financing needs.
Unless you have a lot of equity and an amazingly high credit-score, the chances are pretty slim that you can stroll into your local bank and take out a second loan. If you have below-average credit ask about the possibility of getting a second mortgage with bad credit. Let’s examine current 2nd-mortgage offers that are helping out the “average-borrower” today.
- Home Equity Loans with Fixed Monthly Payments
- Interest Only Payment Option Home Equity Lines
- Debt Consolidation with Lower 2nd Mortgage Payments
- Avoid Down Payment Requirements with Second Mortgages
- Fixed Interest Rate Protects Monthly Payments
- Work with Companies that Waive Origination Fees
- Cash Out to Purchase Investment Properties
- Avoid Private Mortgage Insurance or PMI
Homeowners who have a need for cash to fund life expenses, such as a home remodel or college tuition payments, may decide to take out a home equity loan secured by their home in 2024 and here are a few things they need to know.
Getting access to cheap money with a 2nd mortgage make home improvements is a sweet luxury for millions of homeowners.
Second mortgage companies offer credit lines and loans that let you tap your home’s equity to pay for things that you may not have enough cash for in your savings account. You can choose to get either a home equity line of credit (HELOC) or a traditional home equity loan, also known a second mortgage loan.
The RefiGuide can help you shop for the best HELOC lenders and compare rates and closing costs. (Please be aware that private 2nd mortgage lenders are different than second chance mortgage lenders who offer high risk unsecured personal loans.)
Both have advantages and disadvantages, but we will cover those in a separate article. (HELOC Versus Home Equity Loan)
What the Best Second Mortgage Lenders Are Looking for in 2024
What we want to cover here is how you go about finding the best second mortgage lender online.
There are many 2nd mortgage brokers and home equity loan lenders available and you will do best if you look around and compare lending sources, consider closing costs and compare second mortgage rates today.
The most suitable home equity loan for you is one that you can secure at a favorable rate with manageable terms.
Consider the following criteria when comparing 2nd mortgage companies:
Eligibility Requirements: Investigate the lender’s home equity loan requirements, including minimum credit score and debt-to-income ratio standards, and assess your eligibility. If you meet these criteria, explore the option to prequalify for a home equity loan to obtain an initial rate estimate.
Loan Limits: Determine the amount you need to borrow. If the lender’s loan limits are too restrictive or exceed your borrowing needs, it may be necessary to seek an alternative lender.
2nd Mortgage Rates: Strive to secure a home equity loan or HELOC with the most competitive interest rate available.
Fees and Lending Costs: Be mindful of closing costs, which can comprise 2% to 5% of your home equity loan, along with potential additional fees. However, don’t make fees the sole determinant. A second mortgage company that levies closing costs but offers a lower home equity rate may ultimately result in lower overall expenses.
If you follow our tips and tricks below, you will be able to find the right second mortgage lender:
#1 Compare Apples to Apples
When you are getting quotes from the best second mortgage companies, don’t stop at just looking at the interest rate. Look at the fees, points, origination fees and all the other fees that you are being charged.
Remember, if you compare in many instances, a ‘no fee’ mortgage to one with fees up front, you are not making an apples to apples comparison. The fees in the ‘no fee’ mortgage are often wrapped up into the mortgage interest rate. In some cases they will be hard costs that are rolled into your loan. In this instance, the fees and closing costs would increase the loan amount unless you paid them out of your pocket.
You are paying similar fees; they are simply more hidden. 2024 looks to be shaping up to be a great year to shop 2nd mortgage companies online. Like all home financing agreements, it is very important to compare private second mortgage lenders effectively by considering the terms, interest rates, closing costs and of course, reputation.
#2 Talk to the Second Mortgage Brokers Approving the Loan
Whether you are getting first or second mortgages, you should always talk to the person who will directly handle your loan. This might be a mortgage broker, a bank worker or a mortgage loan officer. You should drill him or her on their qualifications and experience. Does the person have a license, which is required for brokers?
Does the person belong to the National Assn. of Mortgage Professionals, or a similar body in your state? You should get references and look for online reviews.
Experience tells us that in many instances, the loan officer matters more than the mortgage company. A great loan officer can make your loan go through without a hitch, while an incompetent one can cause countless problems.
Also remember that even the best second-mortgage lenders hire bad people sometimes. Don’t simply trust the name of the home equity lender. Find a good, highly reputable loan officer or broker that has experience closing 2nd mortgages, wherever he or she may work.
#3 Anticipate Extra Costs on HELOCs and 2nd Mortgages
Taking out any mortgage will cost money. Added costs on a fixed home equity loan can include title insurance, real estate transfer taxes, escrows for property taxes and homeowner’s insurance.
No matter if it is cash out refinancing a first or second mortgage, you will have added costs and lender fees. If you are really lucky, you will get matched up with a second mortgage banker that wants to pay all your closing costs and origination fees, but don’t hold your breath. Compare the equity loan to the 2nd mortgage program.
#4 Verify the Mortgage Lenders Offer What You Need
Many second mortgage providers offer a lot of programs, but not every lender offers everything you may need. For example, not every home equity lender or 2nd mortgage broker can do a VA loan or Apply for a FHA-loan.
LTV ratios, rates and down payments can vary per lender, even for essentially the same program.
#5 Get a Free Credit Report
You always will be better off shopping for second mortgages when you know what your credit score is. If you have a credit score 700 or above, you will have more options for an equity loan than if you have a 650 FICO. In most cases, the lower your credit score is, the more equity you will need to get approved for a 2nd mortgage loan in today’s housing market.
You can talk more intelligently with your loan officer if you know where you stand credit wise.
#6 Pay More Now or Get Lower Rate?
If you are keeping this loan for a long time, it may be better for you to pay more points up front to get a lower rate. If you think you will refinance this loan or pay it offer in a few years, you may want to opt for a lower mortgage rate and pay more now.
Regarding interest rate, you may also want to consider whether you want to get a HELOCs or a fixed second mortgage rate. As we said earlier, these loans’ advantages and disadvantages are too numerous for this article. However, know that a home equity line of credit features lower initial interest rates, but they are variable and can rise up to a certain limit.
That maximum rate varies per lender, but it is quite high. Also, after the draw period ends after five or 10 years, you start to pay interest and principal.
A home equity loan has a fixed rate over the life of the loan. It will be higher than the credit line initially, but it is locked in for life. You may need assistance when looking for the best HELOC rates.
If you are doing a remodel or new home construction it pays to compare the rates and terms on HELOCs and construction loans.
Whether you want a low but variable rate, but a higher but fixed rate will depend upon your situation, finances and risk tolerance. Before signing documentation it is imperative that you shop for the best second mortgage rates on a loan program that you qualify for. (Expect terms on 2nd mortgages to range from 10 to 30-years.)
#7 Know Who You Will Be Dealing with Before Committing to a Second Mortgage
If you fill out an online second mortgage application, you want to know what is going to happen after that. Will you get a lot of calls from several lenders trying to get your business? Will one specific loan officer contact you? All scenarios can work fine, but you should know in advance what is going to happen when you click “Submit” on a 2nd-mortgage application online.
It is important to know at what point the home equity lender will do a hard pull on your credit report, too.
#8 Self Employed May Need Manual Underwriting
If you are self-employed, you may find that your application cannot be approved with automatic underwriting. To get an approval, you may need to have the lender go through your application manually. Do not forget to ask if your second mortgage broker offers stated income equity loan programs. Also borrowers with credit problems may need a lender that offers bad-credit home equity loans, so don’t be afraid to ask. Very few private 2nd mortgage lenders will advertise equity loan programs for people with low credit marks because it’s very risky. Depending on your scores, you may need to consider a subprime or private money loan.
Credit, Loan to Value (LTV) and Income Requirements for Second Mortgage Loans
Home owners who want to pull cash out of their home for things they need may want to get second mortgages in the coming year. Interest rates were near record lows just a few years ago, and home values continue to soar. Since interest rates have been rising, home equity loans makes more sense than a cash out refinance for homeowners to use some of their home’s equity to get things they want or need, such as a home renovation, car, pay for a college education and other big-ticket items.
- Credit Scores Range from 600-800
- Loan to Value requirements range from 50-90%
- Debt to Income Less than 45% (a few 2nd mortgage lenders allow up to 50%)
It is important to note however that you need to qualify for the home equity loan; they do not just hand them out anymore as they did a decade ago. There also are some risks with inherent second mortgages to be aware of. Below is all you need to know about getting a second mortgage in 2024.
What Second Mortgage Lenders Are Offering Today to Qualified Homeowners
The majority of Americans get a mortgage to purchase their home. After you have made some progress in paying down your home loan, you may opt to get a second mortgage on the home. This is just another home loan that you can get to access your equity for a variety of purposes. Without a 2nd-mortgage, that equity is not available to you until you sell the house.
There are two types of second mortgage options:
- Home equity line of credit (HELOC): This is a line of credit that works very much like a credit card. However, in this case, your credit line is the equity in your home. Check to see what the credit score requirements are for a HELOC today. You can opt to pull out cash on this credit line as needed. A HELOC credit line features an adjustable rate that can go up in future years. It usually is low at first because you are only paying interest on the loan. As time goes on, you need to pay on principal, and rates can also go up. So, bank on your home equity line payments going up as the years pass. When it the rates go up or when you draw period expires, consider a HELOC refinance,
- Home equity loan with a fixed rate: This 2nd mortgage offers a lump of cash that you receive at once from your home’s equity. Sometimes, you may have to pay a higher fixed rate than a HELOC, but you do know exactly how much you will be paying until the loan is paid in full. Many borrowers prefer the steady nature of a second mortgage with a fixed rate and fixed monthly payment set on a precise amortization schedule.
Best Bet to Get a Second Mortgage That Makes Sense
You can choose from thousands of US lenders to get a second mortgage. There is no need to use the same lender as did your first mortgage. In fact, you will usually be better off if you shop around for rates and terms with several home equity lenders. We recommend checking your bank, credit union and a second mortgage broker with access to many HELOC and 2nd mortgage programs.
Get Help Locating 2nd Mortgage Lenders Today Offering the Best 2nd Mortgage Rates Online
To apply for a second mortgage, you will undergo a similar process as when you got your first mortgage. The underwriter for the mortgage company will go over your credit, assets and debt. If you have good enough credit, you may be able to get an 80-85% LTV second mortgage. Make sure that you have been paying your first mortgage on time!
Compare Rates & Terms from Reputable Second Mortgage Companies Online
Today, it is more challenging to get a second mortgage loan than a decade ago, but many people can still get them. There was a time that you could easily get a second mortgage with a 630 FICO, but now, lenders often like to see credit scores in the 680’s.
Also note that you can no longer qualify for high LTV second mortgage. Back in the day, you could get sometimes a 125% LTV loan. Forget that today. Most banks lend 80-90%, but with today’s soaring home values, who know how aggressive second mortgage lenders will get in 2024 and 2025.
For the most part, stated income second mortgages are thing of the past as well. Be prepared to provide your home equity lender with bank statements, pay stubs, W-2s and tax returns. If you are self-employed, you need a profit and loss statement and tax returns. If you have a significant amount of equity and need a program that allows reduced documentation, you may be eligible for a non QM 2nd mortgage or hard money loan, but your traditional mortgage broker or local bank will not be a reliable source for this type of higher risk second mortgage program.
Another factor the lender will review is your debt to income ratio. Most second mortgage lenders want to see a DTI in the range of 28-40% depending upon the mortgage provider. If your credit score is high, you may find a few second mortgage companies approving equity loans for qualified borrowers with debt ratio in the 45 to 50% range.
Employment history also is critical. A HELOC or home equity loan is a serious debt, so the lending bank wants to ensure you have the ability to pay the loan on time every month. The 2nd mortgage lender generally wants to see that you have at least two years in the same work.
Can I Get a Second Mortgage with a Different Lender?
Yes. You are not required to take out an equity loan or HELOC with the lender that services your first mortgage. We strongly suggest shopping 2nd-mortgage lenders and HELOC brokers so you can make a wise decision.
Should I go to a bank or second mortgage lender for a home equity loan?
I depends on a few factors like, how big the loan amount is, what type of equity loan or HELOC you are looking for and what your credentials are ie. LTV, DTI and credit score. If you have perfect credit and only need a small home equity loan, less than $25,000, a look credit union or bank may offer you a great interest rate with limited fees and closing costs. If you are looking for a larger 2nd mortgage loan amount between $25,000 and $1,000,000, or you don’t have perfect credit, then a private second mortgage lender may be the best choice for your situation.
How Long Does It Take to Get a 2nd Mortgage or Home Equity Loan?
You may be able to close on your home equity loan or HELOC within a few weeks, but not always. In many cases, the process can take up to two months, especially if you are self-employed and need to document your income with tax returns or bank statements.
Factors like the timing of the home appraisal and the underwriting process are often beyond your control and can significantly affect the timeline. If you the lender is able to use a desktop appraisal or AVM the process could be automated. Full URAR appraisals take longer to receive and more time to for the underwriters to review. The duration of these steps can vary depending on the appraiser and 2nd mortgage lender.
What You Need to Remember When Shopping the Top 2nd Mortgage Lenders Online
When evaluating lenders for home equity loans and HELOCs consider the following factors:
2nd Mortgage Rate: To minimize your overall loan cost, compare quotes from multiple traditional and private second mortgage lenders to find the lowest interest rate for your desired loan amount and repayment term.
Closing Costs: Choose for a home equity lender with low or no closing costs to reduce your upfront expenses and keep your total borrowing costs down.
Customer Service: Choose a 2nd mortgage company that provides excellent customer service, ensuring they address all your questions thoroughly and promptly.
Getting affordable financing from a trusted 2nd mortgage lender can be a great way to improve your finances and pay for things you need. Just follow our above tips and you should be able to find perfect home equity lenders or second mortgage bankers for your situation. Do not forget to take your time and consider if now is the right time for you to make a financial commitment secure by your house.
About RefiGuide
Bryan Dornan is a financial journalist and currently serves as Chief Editor of RefiGuide.org. Bryan has founded several mortgage and marketing companies and has worked as a loan officer and mortgage broker in the industry for over 25 years and has a wealth of experience in providing mortgage clients with the highest level of service in the industry. Bryan's continual focus is to promote affordable home-ownership to consumers like you across the United States. He also writes for RealtyTimes, Patch, Buzzfeed, Medium and other national publications. Find him on Twitter, Muckrack, and Linkedin
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