Is it possible to take out a second mortgage without paying off the first?

The period of mortgage lending is so long that during the repayment of the loan, many events can occur in the borrower’s life that force him to think about taking out a second mortgage. For example, it was necessary to expand the living space due to an increase in the family, or the borrower was offered a job in another city without housing, but the location is so advantageous that it is more profitable to buy a new apartment than to refuse the position. In such a situation, borrowers are interested in how to solve the problem of purchasing another home in such circumstances and whether it is possible, in principle, to take out another mortgage if the first one has not yet been repaid.

Is it legal to take out a second mortgage?

Theoretically yes. If the borrower is so wealthy that he can afford to pay two mortgages at the same time. The law does not limit citizens in the number of loans issued. In this case, only the bank has the right to refuse. It is the lender who decides how many loans the client will ultimately repay.

Conditions that are taken into account when approving a second mortgage

The credit institution is guided by the following indicators:

1. The degree of conscientiousness of the borrower. In this case, the condition of his credit history is implied. Of course, some banks make concessions in this regard, but when it comes to a second mortgage, this factor can be decisive.
2. Client’s solvency. It is important here that the income is enough to fulfill two mortgage obligations, and at the same time sufficient funds remain for the borrower and his family. At the same time, the lender takes into account both the main income and additional profit of the client, therefore it is in the interests of the latter to provide as many documents as possible confirming the total amount of income.
3. Composition of the borrower’s family. This indicator is of no small importance, because the financial viability of the family is determined depending on the number of dependents.
4. Indicators of the balance of unfulfilled obligations on previously issued mortgages and other loans, if any. In this case, not only the amount of the balance is taken into account, but also the period during which it must be repaid. Moreover, if the borrower has additional obligations, for example, valid credit cards, this circumstance will aggravate his situation. Ideally, you need to have at least seventy percent of the mortgage repaid (under the first agreement) and credit accounts closed on time.
5. The ability of the borrower to provide liquid assets that can be pledged or ensure the fulfillment of obligations at their expense.
6. The client’s ability to make a down payment. Its size will probably be at least 40% of the cost of the purchased apartment. In this way, the bank minimizes its risks.

The listed factors will be taken into account without fail, so before submitting an application you need to evaluate your capabilities and compare them with the final result, that is, with the burden that will fall on the family’s shoulders after obtaining a second mortgage.

What a borrower needs to consider

There are a few more points that should be taken into account:

1. A mortgage with state support may not be suitable. This means that if the first mortgage was issued with government support, obtaining a second loan on preferential terms may be problematic. For example, 450 thousand rubles to pay off the mortgage at the birth of a third child are paid only once. The budget for state support for military personnel and state employees who decide to buy an apartment with a mortgage is also limited.
2. No matter how much a client earns, he must meet the general requirements for mortgage borrowers, that is:

• match the age (be no younger than 21 and no older than 75 years). At the same time, on the date of final settlement with the lender, the borrower must not have reached the maximum permissible age;
• have Russian citizenship;
• be registered in the locality where the branch of the credit institution is located;
• have official documented income and work experience. This requirement does not apply only to those borrowers who apply for mortgage approval using two documents (without proof of income).

As with the first loan, the applicant for the second mortgage must meet the general requirements of the lender and be able to provide additional guarantees for repayment of the loan.

Reasons for refusal

The answer to this question is easy to formulate based on the above. This means that in almost one hundred percent of cases a refusal will follow if the borrower:

• low income;
• bad credit history, serious arrears;
• there is no money to repay the down payment set by the bank;
• the object of collateral is illiquid (for example, premises in a dilapidated building or in a house for demolition);
• There are too many dependents, and only he has income.

How to increase the chances of a positive decision from the bank

In this matter, one should rely on the main indicators and requirements that the bank follows when considering the application. For example, the chances of getting a mortgage loan approved will increase significantly if:

• the borrower will be able to offer as a guarantee a guarantor or co-borrower who meets the lender’s requirements;
• a citizen will be able to provide documentary evidence of receiving a stable additional income (for example, from renting out property);
• the borrower is a current payroll client of the lender;
• confirm the availability, in addition to the mortgaged apartment, of other liquid expensive property;
• provide additional collateral;
• If possible, correct the situation with a bad credit history (for example, take out a small consumer loan and quickly repay it);
• make a significant amount towards the down payment;
• agree to a long lending period (lenders do not like borrowers who pay off debts ahead of schedule or in the shortest possible periods, since they lose part of the profit in the form of interest on the balance);
• agree to obtain insurance from the lender. At the same time, it is advisable to insure not only property, but also yourself;
• pay off as much of the first loan as possible and pay off other debts (it’s a good idea to close your credit card accounts).

Thus, it is quite possible to get a second mortgage. To do this, in addition to the standard requirements for consumers of credit products, the borrower must have an income that will ensure the timely fulfillment of large debt obligations and the necessary amount to pay the down payment.

You should not try to hide the fact that you have an outstanding mortgage. The lender will still find out about this during the application review process, and the fact of concealing information will not work in favor of the potential borrower.