How soon after you buy your home can you get a second mortgage to pay off other debts?

Answer 1

For most banks you need to wait at least one year. However, there are banks that will allow no seasoning on the property to add a second mortgage. Many lenders also offer this as a free add on... If you have little equity in the property it may make sence to wait. If you absolutely need the cash, there are some equity line products that will allow you to borrow up to 125% of your homes value. Its very important that if you take a second mortgage out, that your first mortgage is a fixed rate. If your first is not fixed, fix it now before you consider taking an equity line. Adding a second before fixing your first could put the homeowner in a precarious situation. If your CLTV(combined loan to value) is 125% that means you have 25% negative equity. This is not a good thing to have if your trying to refinance at a later date. If you plan on staying in the property for the long term it does not matter. (assuming you have no need to refi immediately) With a 125% HELOC product your banking on the fact that the home will continue to appreciate. Its dangerous with negative amortization products and in a down real estate market. We are currently in a pretty bad real estate market. But typically to have a new appraised value used other than a purchase price, Typically you should wait a year to take out an equity line.