The ABCs of a Second Mortgage for Renovation

With high-interest rates and low housing inventory in many communities, more and more homeowners are choosing to remain in their current home rather than re-enter the homebuyer market.

But staying put doesn’t have to mean putting up with a space that no longer meets your needs!

Applying for a second mortgage may allow homeowners to take advantage of their home’s equity and keep their lower first mortgage interest rate, allowing them to fund a renovation and bring their vision of a dream home to life.

Here are the basics:

What is a Second Mortgage?

A second mortgage allows the homeowner to leverage their current home equity to fund a renovation. Because the second mortgage is secured by a home, the lender is often able to offer more attractive loan pricing.

What Are the benefits?

1. Homeowners benefit from a fixed rate on a second mortgage – so you’ll know what you are signing up for regardless of how rates change in the future.
2. AHFC recently increased the maximum limit for this loan program to $574,912, with up to a 30-year term, giving homeowners more time to make payments.
3. A second mortgage may have lower rates, potentially saving the homeowner money.

“It has a slightly higher rate than a first mortgage,” says AHFC Underwriting Manager I Stephanie Eddy, “but it’s often more affordable than refinancing the whole loan.”

A second mortgage may be a good option for homeowners who already have significant equity in their home and want to bring their space up-to-date. AHFC’s Second Mortgage allows the homeowner to take advantage of the “as-complete” value when determining the loan amount.

How Does it Work?

• The homeowner contacts a lender who participates in AHFC’s loan programs
• The homeowner gets a bid for their proposed renovation
• An appraiser looks at the bid and evaluates what the home’s value will be after the renovation
• The money sits in an escrow account and the homeowner draws from it to fund the renovation

Learn More At Spring Home Shows!

Want to learn more about second mortgages and explore home renovation trends? Find us at a home show this spring! The builders trade shows offer opportunities to learn about the latest home improvement trends and ask questions of industry experts.

• March 22-24, Interior Alaska Builders Association in Fairbanks
• April 13-14, Kenai Peninsula Builders Association in Soldotna
• April 20-21, Anchorage Home Builders Association in Anchorage
• April 27-28, Mat-Su Home Builders Association in Wasilla