Have you ever wondered why someone can get a low rate on a second mortgage loan, whereas another person pays significantly higher? When determining second mortgage rates, lenders take several factors into consideration. For starters, they'll have to assess the risk involved. Credit unions, banks, and mortgage lenders frequently approve first and second mortgages. It's a risky business, and some borrowers default on the loan. Before approving a request, it's customary for the lender to evaluate the borrower's payment history. In other words, does the applicant pay his or her bills on time? If not, the lender will either deny the request or charge higher second mortgage rates. Aside from payment history, lenders also review a borrower's debt to income ratio, number of recent credit inquiries, etc. Anyone looking to get a low rate on a second mortgage ought to prepare in advance. Check your credit report and improve your score.

A few credit problems won't disqualify you for a loan. Still, good credit can work in your favor. Lenders charge higher second mortgage rates to risky applicants.