If you are considering a second mortgage to access equity in your home and have poor credit, there are a number of options available to you. Your credit rating will determine the interest rates and terms you qualify for on the new loan. Here are several tips to help you improve your application and qualify for a better second mortgage loan.

What is a Second Mortgage Loan?

A second mortgage is a loan secured by your home based on the equity you own. Second mortgages can be obtained from the same lender as your primary mortgage; however, many homeowners find a better deal from a different mortgage lender. Either way, your home will have a second lien on it and if you fall behind on either mortgage the lenders can take your home. When you take out a second mortgage loan you will typically have two payments, one for your primary mortgage and another for the second mortgage.

Why Apply for a Second Mortgage?

There are a variety of reasons for taking out a second mortgage loan. Many homeowners with poor credit use a second mortgage to help them rebuild their credit. When you borrow a lump sum in the form of a second mortgage you can use this month to pay of your high interest debts. This will result in one payment with a lower interest rate for all of the debt consolidated. Remember that consolidating your debt does not eliminate your debts, it simply moves it around to make it easier for you to pay back.

Rebuild Your Credit with a Second Mortgage Loan

Obtaining a second mortgage will not be an instant fix to your credit problems. Once you have consolidated your debts it is important to make all of your payments on time and control your spending habits. If you begin running up balances on your credit cards after consolidating your debts it defeats the purpose of the consolidation loan. Improving your credit score after consolidation means maintaining low balances on your credit cards, being responsible with credit, and paying all of your bills on time. After as little as 24 months you will be on track to having a good credit rating. You can learn more about your mortgage options by registering for a free mortgage guidebook.