Could a Second Mortgage Help My Credit Problems?
Article by SeanH
One of the most common reasons for taking out a second mortgage is to consolidate debt. The borrower may have built up mortgage arrears and got behind with payments on credit cards, personal loans etc.
If you are in this situation, a second mortgage may be a very good step to take. If you have fallen behind on mortgage and other repayments, your credit rating may be damaged and you need to find a way to put things right.
Of course, your credit rating could be damaged for other reasons, even if you’re not in debt. For instance, you could be a self-employed landlord with buy-to-let properties. Your irregular financial situation may not have helped your credit rating. In fact, if you have a buy-to-let mortgage and need to free up capital from your properties, for debt consolidation or any other reason, a second mortgage on the property could be a perfect solution.
So is a second mortgage the best way of repairing your credit problems? It certainly does seem to be an advantageous way of consolidating debt. The alternatives – an unsecured debt consolidation loan, or rolling your debts into your credit card – could leave you vulnerable to loan sharks, and to paying huge interest rates. With a second mortgage, on the other hand, you could get more favourable interest rates – as long as you had enough equity in your property. The interest rates would still be higher than on a first mortgage – or on a second mortgage with a better credit rating – but it is still your best plan for sorting out your debt problems.
Not every lender will consider you, but many will. The first step is to go to a broker. In order to avoid having multiple credit checks done – which will do even more damage to your credit rating – do a credit check yourself and show the result to your broker. Your broker will guide you towards the lenders who will look favourably on your application.
About the Author
Sean Horton is a Director of Enhanced Wealth Limited who are a specialist mortgage broker offering second mortgages