When you’re looking to take out a second mortgage, you’ll need to pay a larger amount of money down. A jumbo loan will require a 20% down payment. While this will increase the amount of money you have to pay upfront, you’ll also be able to get a better rate than you’d otherwise be able to. There are additional hurdles to clear if you plan to use the property for rental income.
First of all, you need to be certain you have enough equity in your home. Many lenders require that you put up as much as 20% down on your new second home. You’ll have to have at least fifteen percent equity in your home. Generally speaking, a second home mortgage is best used to finance a large down payment. You’ll have to be able to live in the property for at least part of the year.
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A second home loan is a type of revolving line of credit that can be used to fund major expenses. It’s good for large down payments, but drawbacks are that you may end up with a higher credit utilization ratio. Plus, a variable interest rate means your payments are likely to fluctuate more frequently. Depending on your needs, a second mortgage might be the best option.
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