The Facts About Second Mortgages

The Facts About Second Mortgages



The Facts About Second Mortgages
Your home: It's probably your biggest asset .​
Having a​ home to​ back you​ up when you​ need a​ loan is​ one of​ the​ greatest advantages of​ home ownership .​
In recent years,​ there has been a​ major increase in​ the​ amount of​ people looking to​ use their homes as​ a​ way to​ get access to​ extra money when they need it​ most .​
One of​ the​ best ways to​ do this is​ through a​ second mortgage.
A second mortgage is​ exactly what it​ says it​ is​ - a loan made in​ addition to​ your first mortgage,​ and it's based on​ the​ amount of​ equity you​ have built into your home .​
Many people use them to​ fund home renovations,​ to​ pay off credit cards,​ or​ to​ put a​ child through college .​
Since you've already been through the​ process once,​ the​ underwriting required to​ get a​ second mortgage is​ much simpler than it​ was the​ first time around,​ and the​ cost of​ the​ transactions involved will be significantly lower .​
This usually makes up for the​ fact that interest rates on​ the​ second mortgage are a​ bit higher than they were on​ the​ first one.
On a​ second mortgage,​ you​ will borrow a​ fixed sum of​ money against your home equity,​ and pay it​ back over a​ specified amount of​ time .​
The amount you​ borrow will be combined with the​ amount you​ still owe on​ your first mortgage .​
It all sounds pretty simple .​
There are just a​ few things to​ keep in​ mind .​
First of​ all,​ don't take out a​ second mortgage on​ your home unless you've built up a​ fair amount of​ equity in​ the​ property already- that is,​ made payments on​ the​ original mortgage balance for a​ good amount of​ time .​
You may still be able to​ get a​ second mortgage if​ you​ don't have much equity,​ but your rates will be so much higher,​ and the​ amount you​ can borrow so much lower,​ that it​ will essentially be a​ waste of​ your time and money .​
This is​ one of​ those things that is​ worth waiting for.
Also,​ look into the​ other options of​ borrowing against the​ equity of​ your home,​ including a​ home equity loan and a​ home equity line of​ credit .​
All of​ these options allow you​ to​ borrow against your equity,​ but there are slight variations among them that mean one of​ the​ three may be the​ best option for you​ .​
It will depend,​ for the​ most part,​ on​ your particular financial standing,​ the​ amount of​ money you​ need to​ borrow,​ and the​ amount of​ home equity you​ currently have.




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