Second Mortgage Calculator

Second Mortgage Calculator to calculate the mortgage payment for your 2nd home mortgage. The 2nd Mortgage Calculator will show if it is worth it to get a second mortgage rather than paying for private mortgage insurance or PMI.

2nd Home Mortgage Calculator

The second home mortgage calculator gives you the option to show the amortization schedule by year or month. For homeowners who own a second home or a vacation house, this 2nd home mortgage calculator is useful in calculating how much they have to pay each month and the overall costs of their second mortgage.

What Is A Second Mortgage?

A second mortgage, also known as a piggyback loan is a mortgage taken out against a property that already has a mortgage that hasn't been paid off. Since the second mortgage is a lien from the first mortgage, the mortgage amount will be lower than the first, and the interest rate is generally higher. In the case of default, the lender has the right to take control of your home. Home equity loans or home equity lines of credit are often used as second mortgages.

Why A Second Mortgage?

There are good reasons why someone would want to take out a second mortgage.

• Payoff credit card debt - The second mortgage has a much lower interest rate than the APR of credit cards. If you owe a lot of credit card debt, getting a 2nd mortgage is an excellent way to pay off your credit card and save a lot of money on interest payments.


• Avoid paying PMI from the first mortgage - If you are paying less than 20% on your first mortgage, you will need to pay private mortgage insurance. To avoid paying for the PMI, you can consider taking out a second mortgage.


• Finance large purchase - If you need to buy a car or another house as an investment.


• Home innovation - If you want to renovate your home and don't have the cash to do so, you can take out a second mortgage to cover the costs of home improvement.


• College tuition and expenses - If you or your kids are going to college and need money for tuition and other costs, you can consider getting a second mortgage.


• Medical bills - If you have medical bills that you can't afford to pay, you may want to get a second mortgage so that you can pay off your medical bills.


• Starting a business - If you need money to start a business, you can use HELOC to buy equipment and other necessities or even to hire employees for your business.


• Stocks, bonds, and other investments - If you think you can make more money with other investments than the interest that you will be paying for your second mortgage, you can consider HELOC.


• Buying a second house - If you are thinking of buying a second house and need more money for the down payment and closing costs, you can apply for a second mortgage.

Disadvantages of second mortgages

While it is nice to have extra cash in hand, there are disadvantages to getting a second mortgage.

• Good equity in your house - in order to get a meaningful amount of money from a second mortgage, you need to have a good chunk of equity in your home. If you just bought your house recently, you will not be able to get a second mortgage.


• The costs might be expensive - there will be closing costs and other one-time fees such as appraisal and loan origination fees that you have to pay. You will have to calculate the fees and see if it is worth the effort to get a second mortgage.


• Lose your home - Since the second mortgage uses your home as collateral, you may lose your home if you fail to make payments.

Should I get a second mortgage?

One of the best ways to use a second mortgage is to use it to increase the value of your home, by improving your home such as installing solar lights to reduce energy usage, upgrading the kitchen and bathroom, or increasing the finished square footage. By making improvements to your home, you maintain the equity in your house. In addition, if you are paying private mortgage insurance or PMI, an insurance that you have to pay monthly if your equity in the house is less than 20%. When the value of your home increases, you might be able to remove your PMI. Your lender will order an appraisal to reevaluate your property and see if it indeed has increased in value compared to other houses in your area. Use the PMI payoff calculator to calculate how much PMI you are paying each month and evaluate if it makes sense to apply for a second mortgage to remove the monthly mortgage insurance. Another good reason to use a second mortgage is to pay off your other high-interest credit card debts. The APR for credit cards is outrageous, so if you are falling behind in your credit card bills, by all means, get a second mortgage. On the other hand, if you are planning to use the second mortgage to buy a brand new car, high-class furniture, or other luxuries, you have to really think hard about it. Do you really need these items or can you live without them? If you want to use a second mortgage for other investment purposes such as starting a business, investing in stocks, or buying a second house, make sure you evaluate the risks and rewards of each investment and have a good understanding of the current economic conditions. When the economy is tough, people getting laid off, businesses struggling to survive, houses getting foreclosure, and stocks losing value, it could be difficult to start a new business, invest in stocks, or buy another property. Ask yourself this question, do I have the necessary experience to pursue this business opportunity or am I relying on others to make all the decisions. If your answer is the latter, you need to reevaluate your decision.

How to qualify for a second mortgage?

There are certain conditions that you need to meet in order to qualify for a second mortgage.

• Strong income history - a strong income history is required so the lender knows that you can repay the loan.


• High credit score - You need to have a good credit score to qualify for a second mortgage. Although some lenders may still take the risk and qualify you with a low credit score, you will end up paying a much higher interest rate.


• Low LTV - You need to have a low debt to value ratio, no more than 43%. Lenders prefer LTV lower than 36%.


• Good equity in your house - You may need about 20% of the equity in your house. Lenders want to see that you have good equity in your house, so in case of default, they can recoup their loss by taking control of your home.

Each lender is different, so you will have to shop around and see what's available.

How long does it take to get approval for a second mortgage?

Just like the first mortgage that you have, the second mortgage follows a similar procedure and process time to approve your loan, and the timeline will vary from lender to lender. You need to get an appraisal for your home and submit all necessary documents that your lender requested to avoid delays. It could take up to a month or even longer for your lender's underwriter to review and approve your loan. Communicate with your mortgage loan officer and see if they need additional information. Loan officers are usually busy with many loan applications, sometimes they may forget to contact you about an issue, so you may want to follow up with them from time to time so they keep you in the loop.

Second Home Mortgage Calculator