Reasons for seeking a second mortgage are not so different from any other reason to access equity in your home.
The guidelines to arranging, and the rates and terms for a second mortgage however, are different from securing a first mortgage. Typically, second mortgages are much easier to obtain because the types of lenders that will provide funding for a second mortgage usually are "rate and fee" driven. They are referred to as "equity lenders".
What does that mean?
Some second mortgage lenders will lend up to 75% of the value of your home.
For example; if your home is worth $500,000 the total value of the home would be $375,000 that you can take mortgage out on using the existing equity. Let say your first mortgage has a balance of $150,000 then you would have $225,000 left to obtain for a 2nd mortgage. Now if the mortgage was registered for 250,000 on your title than you would have only $125,000 available for the 2nd mortgage.
A typical second mortgage will have rates anywhere from 10% - 20%, along with lender and broker fees. That stated, the fees involved are worked into the total amount of the loan. Fees generally are not payable "out-of-pocket" to client, but worked into the mortgage amount.
How much are the fees that the lenders charge?
That depends on the lender of choice, but usually we as brokers will shop around to find the best rate and fee for your best interest. Documentation required to secure a second mortgage, is much less intensive as securing a first mortgage. In many cases, a mortgage application, income proof and an appraisal from an "approved appraiser" is all that is required. In all cases, an appraisal is required to be performed on the subject property.
You can apply for a line of credit behind the 1st mortgage as well depending on your credit history would determine if one could be gotten. A fee will be charge for this product as well.