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Are There Closing Costs For A Second Mortgage?

By Bob Redtree

Are there closing costs for a second mortgage?  Before applying for a second mortgage, read here to find out what it really costs!

For many people looking to purchase a home, a second mortgage is needed to help finance the purchase.  This is because a mortgage lender is often only willing to lend up to 80% of the home’s value without charging PMI.  A home equity line of credit is another form of a second mortgage.  The second mortgage, which will come with a high interest rate, also comes with additional closing costs.

Points

The first closing cost for a second mortgage is points.  To further offset the risks of lending to a borrower with little equity in their home, a lender will often charge additional points to borrower’s who need to borrow more than 80% of the purchase price.  For borrower’s who are using a second mortgage to finance more than 80% of the purchase price, the lender may charge up to an additional 1% fee of the entire amount borrowed.  This would be $2,000 if the combined mortgages are $200,000.

Appraisal Fee

Another closing cost for a second mortgage is an appraisal fee.  If the second mortgage is coming in the form of a home equity line of credit, the lender will require the borrower to order an appraisal to determine the value of the home.  If the second mortgage is used to finance the purchase of the home, then the appraisal used to secure the first mortgage will be sufficient.

Other Fees

There are various other closing costs for a second mortgage which can add up to be sizable.  To complete a second mortgage, a borrower will often need additional title insurance, legal representation, an escrow account, a notary, and the borrower will be charged for various administrative fees.  When it is all said and done, these fees will easily top $1,000.

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