What is a Second Mortgage and What are the Benefits?
Owning a home is one of the best investments you can make in your lifetime, but sometimes the budget can get tight. Along with the typical home-related bills like mortgage note payments, household utilities, and any required repairs—there's also the additional financial obligations such as car payments and insurance, medical insurance, credit cards and the like.
For homeowners that are looking for a way to get ahead of debt or are planning for future commitments like college tuition, a second mortgage may be just the thing. It offers the financial flexibility you need using the smart investment you made when you purchased your home.
How a Second Mortgage Can Benefit You
What is a second mortgage?
A second mortgage an opportunity for you to leverage the equity you've gained in your home. Generally speaking, there are two types of second mortgages.
However, we encourage you to call our office for a better idea of your second mortgage options.
Types of Second Mortgages:
- Home Equity Loan - This is similar to a standard mortgage, meaning that it involves a fixed or adjustable interest rate in increments of 10, 15, 20 or 30 years.
- Home Equity Line of Credit (HELOC) - This is more like a revolving credit account based on the equity of your home. This type of second mortgage loan has a variable interest rate and typically comes with no set term.
How can a second mortgage benefit you?
A second home mortgage doesn't limit how you can spend the money. Some of the more common uses for second mortgages include:
- Paying for your child's college tuition
- Pay off debt from credit cards, student loans, or car loans.
- Renovating or making home improvements
- Finance a large purchase such as buying a car, new appliances, or furniture
There are a few things to consider, however.
Borrowing more money against your home can be risky because if you're unable to repay your second mortgage loan, you run the chance of losing your home to foreclosure. Before taking out a second mortgage make sure you can pay back the money borrowed against the equity.
There are also a few other items related to a second mortgage you should know:
Fees and closing costs—There will be fees and closing costs just like had with your first home loan.
Interest rates—The interest rate for your second mortgage may be higher than your first mortgage. Call our office to learn more about our competitive rates for a second mortgage.
Even with the above fees, a second mortgage is often the best option for those seeking to get ahead of debt, plan for the future or have a large sum for personal needs.
Still not sure if a second mortgage is right in your situation? We can help! Our personalized service is based on giving borrowers the mortgage expertise they need to make informed decisions.