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A 2nd mortgage loan after a bankruptcy is the easiest way to access cash. With online sub prime lenders, you can qualify for a mortgage as soon as your bankruptcy closes. But for near conventional rates, it is better to wait two years and build a solid credit history.

Bankruptcy And Sub Prime Lenders

Millions of people file for bankruptcy every year for many understandable reasons, such as job loss or illness. Sub prime lenders understand this and are willing to lend to such people

Specializing in high risk loans with unconventional terms, sub prime lenders can work out financing for virtually anyone. Legitimate lenders will offer rates that are competitive with reasonable closing costs.

Bankruptcy Affect On Your 2nd Mortgage Rates

The first two years after a bankruptcy are the most difficult for your credit score. Right after your bankruptcy, you will qualify for “E” class loans, the highest rate mortgages.

After a year and a good credit history, you can qualify for better rates with a “C” class loan. Rates are typically about 3% to 5% higher than conventional rates. And in two years, you can possibly have an excellent credit score and get prime mortgage rates.
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Getting a 2nd mortgage loan or home equity loan after a bankruptcy is workable. However, loan applicants should be aware of certain disadvantages to bad credit loans. A bankruptcy is destructive to credit scores.

In reality, many financial experts discourage bankruptcies. Those who file Chapter 7 or Chapter 13 are subjected to higher finance rates on homes, cars, etc. Before applying for a 2nd mortgage, know what to expect and understand the basics of getting a reasonable rate.

Expect Higher Finance Fees or Interest Rates

After a bankruptcy, many people are hesitant to apply for credit. They expect higher rates, which will also increase monthly payments. However, obtaining new credit accounts is crucial to re-establishing and building credit history. On the other hand, getting a lender to approve a credit card application after a bankruptcy is challenging. For this matter, some people choose to get a 2nd mortgage loan.

Getting approved for a 2nd mortgage following a bankruptcy is easier because the loan is secured by your home or property. Thus, if you stop paying on the loan, the lender may claim your property and resell it to recoup their loss.

While these loans are great for improving credit, applicants should not expect the best rates. Traditionally, 2nd mortgage loans have higher rates than first mortgages. However, if you have a recent bankruptcy, anticipate above average rates. To avoid a huge monthly payment, borrow a small amount of money.
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The hassle of making two monthly mortgage payments has prompted many homeowners to consider refinancing their 1st and 2nd mortgages into one loan. While combining both loans into one mortgage is convenient, and may save you money, homeowners should carefully weigh the risks and advantages before choosing to refinance their mortgages.

Benefits Associated with Combining 1st and 2nd Mortgages

Aside from consolidating your mortgages and making one monthly payment, a mortgage consolidation may lower your monthly payments to mortgage lenders. If you acquired your 1st or 2nd mortgage before home loan rates began to decline, you are likely paying an interest rate that is at least two points above current market rates. If so, a refinancing will greatly benefit you. By refinancing both mortgages with a low interest rate, you may save hundreds on your monthly mortgage payment.

Furthermore, if you accepted a 1st and 2nd mortgage with an adjustable mortgage rate, refinancing both loans at a fixed rate may benefit you in the long run. Even if your current rates are low, these rates are not guaranteed to remain low. As market trends fluctuated, your adjustable rate mortgages are free to rise. Higher mortgage rates will cause your mortgage payment to climb considerably. Refinancing both mortgages with a fixed rate will ensure that your mortgage remains predictable.
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Refinancing both your first and second mortgage will lower your monthly mortgage payment and qualify you for overall lower rates. It will also save you money on closing costs and application fees. And while you are looking at rates and terms, you can reevaluate your loan’s payment schedule to better fit your budget needs.

Why One Mortgage Is Better Than Two

Lending companies prefer financing one total mortgage rather than two separate loans. So second mortgage rates are at least a point higher than first mortgage rates.

Refinancing your two mortgages into one will qualify your for a lower rate mortgage. Since lenders charge flat application fees, you will save money by going through the process only once. Closing costs can also be cheaper.

Readjusting Terms

In all likelihood, your mortgages have different terms. Refinancing is a good time to reevaluate those terms and decide what would best meet your budget concerns.

If lower payments are your concern, then choose a longer term. While this will increase your total interest costs, it will ease your immediate budget concerns. Then when your financial situation improves, you can make principal payments to offset the interest costs.

When concerned about interest costs, it’s best to opt for a shorter term with its lower rate. You can also pay points to further lower your rates. But this is only wise if you plan to keep the loan for several years in order to recoup the costs.
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