How to Add a New Home Loan to an Existing Home Loan
- 1). Contact your current mortgage lender to determine the value of your home equity. This will answer the question, "If you sold your home today, how much would you make, and how much would you still owe the lender?" Even if you own a very expensive home, if you have little equity in the home you will not be able to add a new home loan to your existing debt.
- 2). Determine how much you can afford in additional payments. It is crucial to take this step before you take a loan. Only by evaluating your budget will you learn how much you can actually afford, which is often less than a bank will be willing to lend to you. To budget effectively, your total fixed debts should never exceed 50 percent of your monthly income, and it is advisable to aim to stay below 30 percent. How much do you have left in your budget after your mortgage, student loans, car debts and credit card has been paid? This is the maximum monthly payment you can add through a new home loan.
- 3). Obtain loan quotes. In this step, you will contact lenders to determine their estimated rates. You will not have to submit a full application to obtain a quote and you should be wary of submitting even a social security number. It is best to just ask about the bank's current rates the bank and the credit level they require in order to obtain a home equity loan.
- 4). Apply for a loan. Provide a verification of your income through a paycheck or other method. You will submit a credit check and you will also have to verify the equity you have in your current home. Many borrowers find it easiest to use their existing mortgage lender for a home equity loan. Since the lender already has your mortgage application, you may find the process is faster and easier through your existing lender.
- 5). Negotiate your contract. Aim for the lowest rate while keeping your monthly payments affordable. Be wary of adjustable rate home equity loans, as the expense of these loans is unpredictable. Never be talked into taking a loan larger than you determined you can afford in your budget analysis.