Can We Buy Multiple Home Loans On The Same Property?

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Going for multiple loans for the property could create many differences from the first mortgage and is very similar to a cord of credit. 

The sum of the home loan amount depends on the equity available on the already owned property.

Home equity can be defined as the difference between the home’s existing market value and the balance mortgage. 

This would mean that a single property is used as collateral security for both of the mortgages; this would require authorization and permission from the existing lender to approve two mortgages on a single property. 

The mortgages which are permitted are ranked in a certain order, which would mean that the first mortgage taken would precede the second one. 

If the individual decides to sell the property, then he or she must clear the outstanding balance on the first loan and at the same time fully repay the amount before the balance amount is used to repay another mortgage.

This also poses difficulty as it is challenging to get two separate mortgages approved on a single property.

Is taking multiple loans for property a good decision?

In most cases, it is a better option and a much easier one to refinance the home loan from another lending firm because it is provided at a lower risk and a higher amount is provided.

Though, there are many cases where taking two mortgages on a single property has actually turned out to be more beneficial and useful.

An example of such an advantage is that if the existing lending firm, in any case, doesn’t approve a higher required loan amount during refinancing, then going for a second mortgage would work as a great advantage.

Advantages of multiple loans for property:

It depends from situation to situation whether or not a second home loan would be a good option. 

  • An additional mortgage could be beneficial if the individual desires to raise extra funds through the home equity. 
  • Another place where it could be advantageous is when the individual desires to consolidate the debt.
  • Multiple loans for the property could be used for the repayment of other debts, including personal loans and credit cards.
  • It can also be used for purposes including repairing and renovating the already built property.
  • A second mortgage also comes with a benefit under which the individual can avoid fees like exit fees and legal fees in the situations where the individual is a guarantor for a friend or relative or alternatively while refinancing.

The risk involved in multiple loans for property:

Every good thing comes with certain disadvantages or risk factors too. These have to be taken care of. 

Going for another mortgage increases the debt obligation of the individual. The individual must also assess the economic situation to ensure the individual can make the additional repayments. 

The lenders have to face risk, so the lending firms charge much higher fees on additional home loans.

Another disadvantage is that the financing firms offer a much lower loan to value ratio (LVR) ranging between 60-80 percent of the property’s worth.

Managing and overseeing two loans, especially when obtained from different lending firms, may burden the borrower and make it difficult for him or her to pay!

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