Second mortgages with no income proof or unemployed are easier to obtain than you think. Have things been tight in terms of cash flow? Taking out a second mortgage may be the solution when attempting to alleviate financial stress. While it may appear to be counterintuitive when you have limited resources, it can end up saving you money especially when you consider today’s low-interest rates.
Why Consider a Second Mortgage?
Second mortgages are more commonly known as home equity loans. It is a special type of home loan which allows you to use the existing equity as collateral. Second mortgages don’t force you to make changes to your primary mortgage. It allows homeowners to borrow from their home equity without refinancing their original mortgage.
Larger banks typically don’t offer secondary financing. If they do, they tend to be home equity lines of credit. The benefit of these is that they are low-interest. However, new government regulations for credit lines make them difficult to get approval for.
In contrast, qualifying for second mortgages is significantly easier. Although interest rates tend to be higher; it is easier to get approved for the additional funds you need. Additionally, the more equity that is in the home makes approval easier.
Funds can be used for:
- Improving credit score
- Home improvements
- Discharging bankruptcies and consumer proposals sooner
- Preventing foreclosure/power of sale
- Paying bills and mortgage while unemployed
The money you borrow using the equity in your home has little to no restrictions.
Types of Home Equity Loans
There are two types of loans: fixed-term loans, and home equity lines of credit.
A Home Equity Line of Credit (HELOC) is loan approval for a set amount. Funds are accessed when needed like a credit card. Payments are made based on the amount owing. Once paid off credit can be reused for other purposes.
As mentioned, qualifying for a HELOC can be challenging. Lenders may want to see good credit and/or proof of income. This may be challenging if you are in between jobs. Obtaining this line of credit is possible, but experts advise that individuals go through a qualifying broker who specializes in this area. It will improve your chances of being accepted.
Fixed-rate home equity loans, on the other hand, are easier to receive approval for since credit or income aren’t required to qualify. This type of loan tends to be short-term with a fixed interest rate. Unlike a HELOC, a monthly mortgage payment is based on the full amount advanced.
Why Obtain a Home Equity Loan?
You can often be approved in less than 24-business hours and receive your funds relatively soon after that. A second mortgage offers flexible payment terms since the money is based on an asset (secured loan). Lenders may be more likely to adjust payments when needed allowing people to defer payments or pay only interest.
Since a second mortgage is secured against your property; interest rates are often lower than an unsecured loan. Another benefit is the advantage of receiving fixed interest rates.
How Can We Receive a Second Mortgage While Unemployed?
While this may not seem practical mentally, it may allow an individual to save money. Mindfully done, it may be the only solution that will help the most. Lenders will place a higher priority on equity over income. This means that homeowners can obtain this type of financing even if they are currently not working.
With adequate amounts of equity, a mortgage broker can do an interest-only loan. They can also help the person to prepay the second mortgage for a year. In this scenario, there will be a low monthly payment or the elimination of mortgage payments for one year.
Money can be obtained in a lump sum and used at your discretion. By adding payments to the amount borrowed, people may obtain up to a year without needing to make payments or can make low payments.
This will provide time to improve credit, return to work, or sell the home if necessary.
What if there is a Poor Credit History?
Obtaining a second mortgage with a low credit score isn’t impossible. Find a mortgage broker who specializes in dealing with low credit, and the process won’t be as complicated. These types of mortgage lenders operate exclusively with certain mortgage brokers who specialize in this area. There are several places that homeowners can receive the best deals with good rates.
Second Mortgages: No Income Proof or Unemployed
Aside from paying bills, there may be several ways that money can be allocated. Some choose to pay down or pay off high-interest credit cards. The advantage of paying off high-interest credit cards is that it frees up money that can be spent elsewhere. It can mean the difference between paying 20% on a credit card to paying 5% on a second mortgage. Often, the interest paid on the loan is significantly less than what you are paying on credit cards monthly.
Furthermore, there is a time span for repayment. The goal with these loans can be that in a certain time all debts are paid off, and the benefit is that they will get paid in full. Whereas, if the individual is paying off a credit card it can take much longer. When the interest paid is calculated, people may end up paying for their purchases several times over.
Others may choose to debt consolidation. It is simpler than remembering when to pay bills and in today’s low-interest market, it makes perfect fiscal sense. Most people end up saving money.
Both these methods allow homeowners to free up money that can be spent paying bills or a mortgage. Furthermore, equity in homes is always rising. It never decreases. This is what can make a home equity loan a wise decision.
Homeowners need to decide what will benefit them over the long term. Being unemployed is stressful enough, but not having enough income to pay bills makes things worse. Always consult with a broker to uncover the best plan for your situation. They will guide you through the process and provide homeowners with the best available options.