Your credit score is just one of the main factors that will affect the interest rate on your second mortgage. It is important that you be aware of all of these factors in order to get the best deal possible from the bank or lender of your choice. When talking about a second mortgage, it is ultimately your ability to pay it back that matters. One of the key indicators of this is employment history and current employment. If you’ve been working for the same company for years, or have a business that has been up and running for a long time, then this is interpreted as a sign of job stability and is a definite plus. A spotty employment record would be one consisting of short stints in many different companies or professions. This may be viewed by lenders as unreliability or fickleness on your part, and they will try to mitigate this risk by laying on a higher interest rate. The amount of equity you have in your first mortgage is another main consideration.

How you handled your first mortgage will naturally reflect on your ability to pay.  Banks will look at your payment history along with the actual amount of equity. Any change in the value of your property will also reflect on your interest rate. A higher value will count as increased equity, while lowered value will be looked upon as a risk. The better you handled your first mortgage, the better your negotiating position for the second one. Alternatively, you can opt instead to take out a home equity line of credit, which allows you to borrow only as much as you need as opposed to a single large sum. This could make your loan much easier to settle in the long run.

                Another possible factor that could affect your interest rate could be the purpose you are borrowing.  If you’re going to use the money in order to invest in some new business venture as opposed to something like a grand vacation, your bank may be able to factor that in as additional potential income and give you a slightly reduced rate.

It is best to shop around and possibly go to a mortgage broker who may find a better deal for you.