A Guide Through A Second Mortgage Loan

Financial institutions are everywhere in the country. One cannot possibly pass a street without coming face to face with some branch of a financial institution or bank. The most popular feature of these banks and financial institutions is to offer loans to those in need. The benefits and rewards of some schemes offered by the banks can tempt even those who do not require it. More more about LAP. 

However, the most beneficial loan offered by a financial institution or bank is the loan against property as it is a secured loan. Even so, sometimes, acquiring a single loan against property may not be enough, or some may wish to get access to some extra immediate funding for various purposes such as medical, educational, marital, etc. in which case, these financial institutions and banks also offer a Second Mortgage loan. Second Mortgage loans are also called home loan top-ups.

What are Second Mortgage loans?

As the name “Second Mortgage” loan suggests, it is acquiring a loan against property already being used as collateral property in the first loan against a property by the financial institution or bank.

The loan bearer may use the collateral property to acquire an additional and secured loan amount on the same property used as collateral in the first loan against the property. In most cases, the financial institution or bank that has lent the first loan against the property offers the Second Mortgage loan to the loan bearer.

For example, let’s assume an individual applies for a loan against the property of the amount 30 lakh rupees in a certain year, the financial institution or bank they apply for the secured loan takes their property as the collateral property. Then in another five years, they need another loan of 5 lakh rupees for that reason. In that case, instead of opting for an unsecured personal loan that comes with a high interest rate, they may choose to borrow the needed 5 lakh rupees against the same property that was used as a collateral property in the first case.

That individual needs to contact their respective financial institution or bank from which they borrowed the first loan against property and acquire the additional 5 lakh rupees loan. The total sum of the loan amount to be repaid becomes the original 30 lakh rupees plus the recent 5 lakh rupees along with the interest rate amount minus the sum of EMIs paid up until now. The second loan of 5 lakh rupees is called the Second Mortgage loan.

What are the features of a Second Mortgage loan?

• A Second Mortgage loan can be taken only by those who have already taken up a Loan Against Property (LAP) but require additional funds. The additional loaned funds do not have a restricted usage and may be used to meet any personal requirements as well as financial or commercial requirements by the loan bearer.
• The loan bearer does not need to submit any other collateral or mortgage to the financial institution or bank when securing a Second Mortgage secured loan. It is a highly recommendable option over acquiring an unsecured personal loan with high-interest rates.
• Financial institutions that offer these “Second Mortgage” loans allow the loan bearer to repay the loan in various ways. The loan bearer may choose to pay a higher amount of monthly EMIs or may extend the loan tenure of the loan.
• Financial institutions and banks have to verify the loan bearer’s financial profile and credits just like they would in the case of the first loan against the property before they can release the funds required of the “Second Mortgage” loans.
• The financial institutions and banks releasing the “Second Mortgage” loan have to re verify the credit record, repayment ability, along with collateral property value of the first loan against property.
• An individual must take utmost precaution and care when applying for a “Second Mortgage” loan as they will be putting their property at a higher risk by submitting it as collateral property twice.

The process to apply for a “Second Mortgage” loan is easy and speedy, and it is also the best way to go about acquiring emergency funds. When comparing between “Second Mortgage” loan and an unsecured personal loan, the prior option is far better as it has low-interest rates, and the repayment tenure is also greater than that of an unsecured personal loan. The key to having an excellent credit history is paying EMIs on time, as having a low credit score can hinder the chances of acquiring a “Second Mortgage” loan.