How to Explain Second Mortgages to Your Clients

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November 11, 2020 | By RGR Marketing Blog

A Second Mortgage Helps Homeowners Get the Most Out of Their Primary Asset

A home is an asset that can provide a homeowner with the capital they need to overcome a wealth of life’s obstacles. This is the core reason why second mortgages are so popular these days. As a mortgage professional, you no doubt have prospects inquiring about them all the time. But the key to converting any prospect into a client all has to do with matching the right prospect with the right product at the right time in their life.

This is important any time you’re trying to sell a mortgage, but when you’re selling a second mortgage, it takes on an even greater importance. To help improve your closing percentage, here is how a second mortgage works and how to tell if your prospect is an ideal candidate for one.

Understanding the Second Mortgage

A second mortgage is a loan that is secured by the equity in one’s home. The home acts as collateral, so the amount of the second mortgage is limited to how much equity the applicant has accrued in their home since they originally closed on it.

Second mortgages are typically provided in one of two forms – a lump sum or a line of credit. A lump sum second mortgage provides the homeowner with the complete amount of their loan in cash, whereas the line of credit works like a regular line of credit, in which the homeowner can withdraw a desired amount from a pool of money.

Payment on the lump sum works just like a standard mortgage, with a fixed amount being paid every month, with interest, until the loan is paid off. With a line of credit second mortgage, the homeowner isn’t required to withdrawal funds. The money is simply there should they need or desire to do so. Paying the line of credit back is like making payments on a credit card, and the homeowner has the option to repay and borrow over and over.

Top Selling Points for Second Mortgages

There are three key reasons why a homeowner may want to consider taking out a second mortgage on their home. These include:

Larger loan amounts
Lower interest rates
Tax benefits

Since a second mortgage is secured by the equity in the home, it often allows homeowners the ability to gain access to a larger loan amount than they would had they gone through traditional personal loan avenues. Depending on the lender and the accrued equity, a homeowner may be able to borrow as much as 85% of their home’s value.

Second mortgages are typically lower risk products, so lenders are more likely to offer them at lower interest rates than many other types of products. In fact, they typically have much lower interest rates than personal loans or credit cards.

Another benefit of a second mortgage is that it can provide certain tax benefits to some borrowers. For instance, the homeowner may be eligible for a mortgage interest deduction.

Identifying Ideal Candidates for Second Mortgages

Some prospects are stronger candidates for second mortgages than others, making identifying them an important part of any mortgage officer’s job. For many cases, this simply involves asking what the homeowner is planning on using the money for. Some of the most common reasons include:

Consolidating higher interest debt
Making home improvements
Paying college tuition
Paying medical bills

These four reasons are the most ideal because they are important parts of one’s life and therefore the borrower will likely be adamant on keeping to their payment schedule. Other reasons, like buying a car, going on a vacation, or buying investment properties, are much riskier for the lender.

At the end of the day, if the second mortgage does not add to the value of the home or to the earning power of the household, then it may not be in the best interest of the lender to take on the extra risk.

Looking for Second Mortgage Prospects? Contact RGR Marketing

At RGR Marketing, we specialize in providing our mortgage clients with highly targeted mortgage leads based on their own unique needs. If you are looking to improve your second mortgage closing percentage, then we can help. We can provide you with a verified list of prospects that have shown recent increased interest in acquiring a second mortgage.

RGR Marketing has been providing mortgage companies with the leads they need to grow for more than 20 years. Contact us today to find out how our exclusive, verified leads can help your business keep its sales funnel full.

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A Second Mortgage Helps Homeowners Get the Most Out of Their Primary Asset

Understanding the Second Mortgage

Top Selling Points for Second Mortgages

Identifying Ideal Candidates for Second Mortgages

Looking for Second Mortgage Prospects? Contact RGR Marketing

Start making more
money today!

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A Second Mortgage Helps Homeowners Get the Most Out of Their Primary Asset

Understanding the Second Mortgage

Top Selling Points for Second Mortgages

Identifying Ideal Candidates for Second Mortgages

Looking for Second Mortgage Prospects? Contact RGR Marketing

Start making more money today!

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