A third mortgage is a type of loan for a house where the amount lent is based on the current value of a property. It is the third in a sequence of mortgages and it is therefore subordinate to the two previous ones. The fact that it is prioritized lower does not mean that you can pay it whenever you like. It only means that you have to pay the first and second one before you pay it. In addition to paying off the first and second mortgages, you will as well be paying the third.
Third mortgages are not as common as they used to be in previous times. This is because lenders are usually unwilling to give it in order to protect themselves. Nowadays, getting one is hard due to the risk of foreclosure. Most lenders want to ensure that they get their funds back because if there is foreclosure, the first mortgage has a preference over subordinate loans.
This means that even the second mortgage will be paid before the third is considered. In this kind of situation, the third mortgage lender may never get their full funds back since it carries the least security. More often than not, because of this, the interest rates are high. You can read further on it here.
Qualifying for a Third Mortgage
You may already have two mortgages on your property and you are looking to work on your home by increasing its value. It may also be that you want to have some funds at hand but can you have a 3rd mortgage? There is hope that you might be eligible.
To qualify for one, a person’s income, credit scores and other mortgages are assessed and considered by the lender. Additionally, their employment history and any debits will also be considered. The value of their property is typically used as collateral. The higher this is, the higher the chance that a borrower can get the amount that they desire. These can be in form of lines of credit, consolidated loans, or mortgage refinancing.
Furthermore, for a third mortgage to be practical, there is also a need to put into consideration the total amount that a borrower is paying on their previous mortgages. Bear in mind that payment will have to be made simultaneously every month on each of these mortgages but the third mortgage will be at a much higher interest rate.
To ensure that you qualify, you should do a thorough appraisal of the financial implications to see if securing another mortgage is feasible. That is, see if you will be capable of fulfilling your monthly payment. This is called debt service capability. You should also carry out proper research. If the terms of the third mortgage are favorable and you are able to meet up with the monthly obligations, then it may be of benefit to you. You can see how to get it here https://www.sapling.com/6504740/3rd-mortgage.
Keep in mind that if you default, the collateral which is your home will revert to the lender and it can eventually go into foreclosure.
Benefits of a Third Mortgage
A third mortgage is beneficial as you can use it to improve your home or your lifestyle. It is usually meant as a form of interim financing to help meet your goals. It can make supplementary funds available to you to use as you deem fit. You can even put it towards buying a property, use it for vacation, or for paying school fees for a family member. Usually, a lender may be able to give you up to 85% of the value of your home. This means that if your home has a high value, you are able to secure a higher amount of funds.
Third mortgages provide you a way to secure alternative funding when banks as well as other traditional lenders refuse to lend. You can learn more on private lenders and how to find them in this article.
Much like any form of a loan, you have to pay interest on a third mortgage and this is usually high. Also, because of the risks involved, most lenders are not willing to provide them. As such, you may not be able to secure it from traditional lenders and may have to resort to private lenders.
As an addition, you have to make monthly payments on all three mortgages and you must not default on any one of the three.
Is a Third mortgage Right For You?
Before applying for a third mortgage, it is wise to meet with a broker. A broker will be able to help you ascertain if it is a good option based on your financial situation. Additionally, they may be able to find a lender for you. By knowing and understanding your standing as regards this loan, you can overcome any credit issues when approaching a private lender. You can also consolidate your debt by getting low interest rates and increasing your cash flow.
Obtaining a third mortgage has both its advantages as well as disadvantages. Although it might be difficult to secure it, there is hope that you can if you need it. Before going ahead to apply, you should ensure that you qualify. You can consult with professionals who can help you understand your financial standing and your ability to service your debts. With this, you can make an informed decision so that you do not get into trouble and get your home foreclosed.