Your Personal Guide Through Second Mortgage Loan

Second mortgage loan is also known as home loan top up. As the name suggests, the second mortgage loan means getting loan against a property which is already being kept as mortgage to a bank or NBFC. The same mortgaged property is used by the borrower to get additional secure loan. Normally the same bank or NBFC, who gave the first mortgage loan, gives the second mortgage loan to the borrower.

For example, consider that Mr. Ashok took a home loan amounting Rs. 30 lakh in 2010. In exchange of loan amount, the bank keeps his house as mortgage as it’s a secured loan. In 2015 he needs to take a loan of Rs. 5 lakh for his personal needs. So instead of going for an unsecured personal loan, he decides to get a second mortgage loan on his existing home loan. He contacts the bank through which he got his home loan. He gets the additional loan amount of Rs. 5 lakh from the bank against his house. This way his loan repayment amount increase with this additional loan amount and its interest rate. This additional loan is known as second mortgage loan.

Features of Second Mortgage Loan:

Second mortgage is used when someone with current mortgage loan needs additional funds. These additional funds can be used to fulfill any personal needs as well as for business expansion of the borrower.

The borrower doesn’t need to produce any other security or mortgage to the bank to get a secured loan. So it’s a good option for an unsecured personal loan.

Banks and NBFCs offer various ways to repay a second mortgage loan. A borrower can pay off the loan with increase in tenure or by increasing the monthly EMIs.

Before giving a second mortgage loan, banks and NBFCs repeat the whole process of verifying borrower’s financial profile. They check the borrower’s credit score, repayment capacity and the value of the property which is being kept as mortgage.