Let’s say you own a home (and a mortgage) but you need to borrow money. You may need to borrow money to start a business or to do home repairs. Where will you get the money from? Since you are borrowing money, it means that you have no extra money lying around – but, you do have a house. And that’s what a second mortgage is: it’s the ability to borrow money using your house as collateral. This is also called a Home Equity Loan.

Let’s say your home is worth $300,000 and your mortgage is $225,000. A second mortgage can be as high as $75,000. That’s a significant sum of money! But you have to be careful: if you don’t pay back your loans, the bank or lender will foreclose on your home and you will lose your house. Losing your house due to non-payment is severe. As such, we recommend that you only take out a second mortgage if there’s a good reason to do so. Two typical reasons why a second mortgage makes sense are:

• INCREASE NET VALUE: The money from the second mortgage is used to earn more money. For example, you use the money to open or expand a business. Once the business is up and running, the extra income from the business can be used to pay back the loans.
• AVOID PMI: In some cases, it makes sense to take out a 2nd mortgage and use the money as a downpayment on your home purchase. A downpayment of 20% will allow you to avoid PMI (private mortgage insurance) payments.
• FUN MONEY: It is not recommended to take out a second mortgage and use the money to go on vacation or do something fun. You should also avoid taking out a second mortgage to pay for daily expenditures. Regardless of why you want the money, you need to always think of how you intend to pay back the loans.

HD Lending is one of the few establishments which offer Owner Occupied Hard Money 2nd Mortgage Loans. That’s a mouthful but the meaning is simple: instead of borrowing money from a bank or credit union, you borrow from private investors. First, you take out a hard load to purchase the primary residence (Owner Occupied Loan) and then you take out a 2nd mortgage loan using the house as collateral.

Owner-occupied hard money 2nd mortgage loans hold the same risks as a 2nd mortgage from a bank. Namely, if you fail to make your payments, the investors will foreclose on your house. Contact us by email or telephone: (480) 688-8688.