2nd Mortgage after Bankruptcy: How to Qualify for a Competitive Home Equity Loan

Taking out a second mortgage after a bankruptcy can help you reestablish your credit. Because your home is used as collateral, you will have a much easier time qualifying for decent interest rates when you have bad credit. Here are several tips to help you find the best second mortgage without losing your shirt in the process.Having a bankruptcy on your record is a financial hurdle that can be difficult to overcome. If you have a fair amount of equity in your home you can use this equity to rebuild your credit rating. Responsible use of credit along with making all of your payments on time is the first step to repairing your credit.How Long Can You Wait After Bankruptcy?It is possible to qualify for a second mortgage immediately after your bankruptcy is discharged; however, the interest rate you receive will be extremely high. The longer you wait before taking out a second mortgage, the more affordable the interest rate will be. In as little as six months you can have enough payment history with your existing mortgage to qualify for a competitive interest rate.Before you apply for a second mortgage it is important to start building up your credit history by paying all of your bills on time. You can open a small credit card account and use this to help establish your payment history; however, it is important to maintain low balances on any credit card accounts you open. Making regular, on time payments on low credit card balances will help you reestablish your credit history.How Much Can You Expect to Pay for a Second Mortgage?Second mortgages come with higher rates and fees than you would pay for your primary mortgage. This is because the second mortgage lender assumes more risk than the primary mortgage lender. If you have poor credit or a bankruptcy on your record the amount of risk goes up and the lender passes this risk on to you in the form of higher rates and fees.For homeowners with poor credit a second mortgage can be more affordable than a home equity line of credit. Second mortgage loans come with fixed interest rates and allow you to borrow a specific amount of equity. It is important to shop from a variety of lenders to find the best loan offer for your financial situation. You can learn more about shopping for the best second mortgage by registering for a free mortgage guidebook.