Browse Forums Home Finance 1 Sep 28, 2010 4:33 pm Hi. My wife and I are considering taking out a $50k line-of-credit on our house to pay back student loans in the USA (while the exchange rate is good) and pay off a credit card (we're thinking of both of these as debt consolidation), and to renovate parts of our house (which will add significant value). We can easily afford to pay it back and my job is permanent and as secure as any in this country. This is our first home loan ($295k owed, home valued at $375k). We're not really sure if there are any hidden or important consequences of taking out a second mortgage that we've overlooked, either for our house or any other aspect of our finances (tax, insurance, who knows?). Any thoughts from the more experienced? Re: Consequences of a second mortgage? 2Sep 28, 2010 10:02 pm You will find that noone will do an actual "2nd" mortgage - ie you have one loan with lender A and then another loan with lender B. Most lending institutes only lend up to 80% without mortgage insurance so if your place is valued by them at $375 the most they will lend is $300k less your existing loan would only leave you $5k. Some lenders will lend up to 90% on a refinance however this becomes harder as mortgage insurance becomes involved. This will cost you a fair amount but may let you increase your overall debt to $337.5k - an increase of $41.5k. You would be best to speak to your lender / broker to see whether they would lend more then 80% as a first step. Some things are worth waiting for. Re: Consequences of a second mortgage? 3Sep 28, 2010 10:56 pm Thanks kyton. You're right about the mortgage insurance. We've been approved for $43k plus around $1200 insurance (we could have gone up to $50k but the insurance skyrocketed). It's all through the CBA, not a second lender. I guess what gave me pause was that through the whole process it was called a line-of-credit. Once the contracts came in to sign it was suddenly referred to as a second mortgage (along with an extra $250 fee that wasn't mentioned before). Probably just terminology, but we've taken the contract home to read over one last time. Repayments will be no problem. But I don't want any other surprises, either from the bank (looks ok though) or some other aspect of our finances that change because we suddenly have 2 mortgages. Just being cautious due to inexperience I guess, hence the request for comments from the more experienced here. Re: Consequences of a second mortgage? 4Sep 28, 2010 11:19 pm We have a Line of Credit. Only thing to be cautious of is the higher interest rate. Custom European Cabinets - Melbourne Kitchen Specialist PM for business details as website currently being updated! Our Crazy Owner Builder Journey! Hi team, Im looking for a second hand sd4b monitor preferably white. 0 8923 We were lucky in that our old house was so small (86 square metres) compared to the new house, they were able to take enough readings around the old backyard house before… 8 37143 Hi, We have a single story MacDonald Jones house, on a waffle pod slab with steel frame. Are we able to build a second story extension? Other info is we are 900mm from… 0 8476 |