When is getting a Second Mortgage the best option for you?

Mortgage and Lending with www.DaveYourMortgageGuy.com - Legend Lending NMLS #293883

When getting a mortgage you will want to know all your options?  And of course you want to make sure you are choosing the best mortgage for your needs.  Many times I hear that other banks do not offer 2nd mortgages or that they do not exist.  I am here to say they do exist and to explain when getting a 2nd mortgage could be best for you. 

Jumbo Loan

A jumbo loan is considered any conventional loan with a loan amount over $417k.  So what do you do if you loan amount is over $417k?  You could get a Jumbo mortgage, but the rate for a Jumbo Mortgage is usually .75% to 1% higher then a normal loan.  But if your total loan amount is small enough you can split the loan into 2 loans.  You can keep the first loan at $417k and get a 2nd mortgage for the difference.  As an example, you have a $500,000 loan.  Your rate could be 6% on a Jumbo loan.  Or your could do 2 loans, one at $417k and a 2nd mortgage of $83k with a rate of 7.5%.  The option of 2 mortgages would save you about $180 a month. 

Waiving your Escrow account

Waiving your escrow account means to not include your taxes and insurance in your payment.  The only way to do this is to put a down payment of 20% or have 20%+ equity in your home if you are refinancing.  Or you could use a 2nd mortgage to make up that 20%.  As an example, your home is worth $200k and you need a new loan of $190k.  based on this you would need to include your taxes and insurance in your payment.  Or.... You could do a first mortgage of $160,000(80%) and a second mortgage of $30,000.  This would allow you to not include your taxes and insurance in your payment

Mortgage Insurance is Not Tax Deductible for You

If you make over $109,000 a year, mortgage insurance is not tax deductible for you.  But if you get a conventional loan for more then 80% loan to value(less then 20% down payment), you will have it.  Unless you get two loans.  Another example, you only want to put a 5% down payment.  So you would want to do a first mortgage for 80% of the sales price and a second mortgage for 15% of the sales price. 

A Lower Payment 

Some times getting a 2nd mortgage will allow you to get a lower payment.  Just like our example under "Jumbo Loans".  But you can also save on  your monthly payment if you are not getting a Jumbo loan.  Let's say you are buying a home of $200k with a 5% down payment.  If you chose to get one loan with mortgage insurance your payment would be about $88 higher then a mortgage option of two loans.

Keep in mind 2nd mortgages are not for everyone.  You have to have great credit(680+).  They expect you to have money in the bank for reserves and there may be other requirements.  A rate on a 2nd mortgage can be from 6.99% to 9%.  And the min loan amount is $10k to a max of $100k(sometimes higher).  Our home is our biggest asset, make sure you are getting the best mortgage for that home.  Whether you are buying a new home or refinancing that home, call me today to make sure you are getting the best mortgage possible.   

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David Krichmar 

Mortgage Banker NMLS#293883 

Legend Home Lending

LLC NMLS #229421

Top 1% Loan Officer Nationally

Has Written For Realtor Magazine, Houston Agent Magazine, Scotsman Mortgage Guide

Appeared On Fox Business


Named 5 Star Mortgage Professional 2013, 2014, 2015, 2016, 2017




For More Mortgage Info Follow me at  Dave's Blog


If you are looking for a FHA, VA, USDA, Homepath, Conventional, Jumbo, Construction, FHA 203k mortgage in Fort Bend County, Sugar Land, Houston, Katy, Harris County, Brazoria County, Pearland, Richmond, Bellaire, West University, The Woodlands, Kingwood, Friendswood, Clear Lake, Galveston, Fulshear, Tomball, Spring, Conroe, Montgomery County or anywhere in Texas I am your GUY!  


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Comments (3)

Indera Coggins
Re/Max 100 - Dunkirk, MD

Dave, great pointers. I will pass this along to a couple clients that would benefit from your blog pointers.

Thanks again. Always great info on ActiveRain.

Jan 17, 2011 05:57 AM
David Krichmar
www.DaveYourMortgageGuy.com - Legend Lending - Sugar Land, TX

Thanks Indera. 

Jan 17, 2011 06:07 AM
Patrick Lim
Coldwell Banker United Realtors - Sugar Land, TX

Outstanding job on a well-written article. Definitely good information for me and also that I can give to my buyers. Thank you!!!! 

Jan 17, 2011 07:35 AM