Read Your Second Mortgage Contract
Some people are so excited when they are presented the contract for their second mortgage that they fail to read it. It is extremely important to always read the contract before you sign it because you need to know exactly what is expected of you and what the consequences will be if you default on your loan. If you are guilty of this, you need to restrain your enthusiasm and read each paragraph of your contract.
In your second mortgage contract, you will find the interest rate that you are being charged. You must be cognizant of this percentage rate. Your lender should have explained to you the reasons for the interest rate that you are being charged. If you have impeccable credit, the interest rate should be low. Be familiar with what your credit rating is because that is what determines your interest rate. Also be familiar with which credit scores are normally associated with which interest rate. If you have a credit score of 720 and you know that a credit score of 720 should command an interest rate of 3%, then your contract should reflect that rate. If you notice that your interest rate in the contract is different from what you know it should be, you should alert the lender before you sign it. The discrepancy may be typographical error.
You should also pay attention to the clause that discusses the credit and legal ramifications if you default on the loan. You should know what recourse you have if you are unable to meet this financial obligation. You should know what consequences you face if you default on this loan. The contract should tell you if you would have the option to refinance if needed and when. It would also tell you if there are any prepayment penalties if you pay off your second mortgage early. If you do not agree with the terms, do not sign the contract.
You should also make sure that the monthly payments are within your range. If you are not comfortable with the monthly payments, or if you foresee a problem in the near future, you should alert your broker immediately. Let them know if the payments are not what you initially discussed. There could have been some fees added to the contract of which you may not be aware. Not knowing about those additions could make repaying the second mortgage difficult if you do not address it before your signature goes onto the paper.
Getting a second mortgage can be a very exciting time, for it can denote a change or a restructuring in your finances. It can mean additional funds for a rainy day, payment towards a college education, a home addition, or an exotic vacation. Whatever the reason for obtaining the loan, never be remiss about reading the contract and asking questions on any part of it that you do not understand. Do not sign the contract until you are in complete understanding and agreement with the terms stated therein. Refusing to do so can result in financial disaster.
Suzanne Simpson is Mortgage Associate based in Canada. She has written many papers on Mortgage and related topics. For more information on <a href=”http://www.canadianmortgagesinc.ca/second_mortgage/“> second Mortgages</a> and <a href=”http://www.canadianmortgagesinc.ca/second_mortgagecanada.html“> second mortgages Canada</a> ,
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