Understanding A Second Mortgage

Understanding A Second Mortgage 1

Understanding a​ Second Mortgage
If you’re in​ need of​ additional funds and you​ own a​ home,​ you​ may have the​ opportunity to​ borrow against your home through a​ second mortgage.
A second mortgage is​ another name for a​ home equity loan .​
The amount that can be borrowed on​ a​ second mortgage is​ typically based on​ the​ difference between your home’s current value and your original mortgage principal .​
This type of​ loan utilizes your home’s equity to​ provide you​ funds for home repairs,​ school tuition,​ debt consolidation and other financial needs .​
For example,​ if​ you​ have a​ child who’s about to​ go away to​ college and you​ need money for the​ tuition,​ a​ second mortgage can you​ help you​ afford your child’s education .​
If you​ want to​ make home repairs or​ renovate your home,​ a​ second mortgage can supply you​ the​ funds you​ need to​ get the​ job done .​
It’s a​ good way to​ tap the​ asset value of​ your home to​ meet your investment and budget needs,​ and helps you​ avoid incurring high interest unsecured debt like credit cards.
Second Mortgage Benefits
There are some innate benefits to​ a​ second mortgage .​
First of​ all,​ since a​ second mortgage is​ based on​ your home’s equity,​ as​ a​ home owner,​ you​ have the​ funds readily available .​
a​ second mortgage is​ a​ secured loan and is​ generally easier to​ obtain than other types of​ loans.
Also,​ the​ interest paid on​ a​ second mortgage is​ normally tax deductible .​
Not all loan interest can be deducted from your annual taxes .​
With a​ second mortgage you​ can easily deduct the​ interest you​ pay on​ your second mortgage from your taxes.
Second Mortgage Disadvantages
There are some disadvantages associated with a​ second mortgage that you​ need to​ be aware of .​
For starters,​ since the​ second mortgage is​ being based on​ your home’s equity,​ you​ are putting your home on​ the​ line .​
If you​ default on​ payments,​ the​ bank can take away your home .​
Also,​ interest rates can be higher than a​ first mortgage,​ especially if​ you​ have a​ low credit score .​
a​ low credit score always affects the​ interest rate of​ your loan and the​ amount that you​ can borrow.
How to​ Get a​ Second Mortgage
If you’ve determined that a​ second mortgage is​ the​ answer to​ your financial needs,​ you​ need to​ do a​ few things .​
You need to​ make certain that the​ reason why you’re getting a​ second mortgage is​ worth borrowing against your home .​
For example,​ if​ the​ only reason you’re getting a​ second mortgage is​ to​ purchase a​ new motorcycle,​ and you​ already have two,​ you​ need to​ think if​ the​ end result is​ worth taking out a​ second mortgage .​
Also,​ you​ need to​ get your home appraised .​
a​ home appraisal will establish the​ current market value of​ your home and be the​ value used to​ determine the​ details of​ your second mortgage .​
After the​ appraisal,​ you​ need to​ find a​ lender .​
Check with the​ lender who you​ used for your first mortgage to​ see if​ they’re a​ good source for a​ second mortgage .​
Also look online for second mortgage lenders and resources .​
You never know where you’ll find the​ best rate on​ a​ second mortgage .​
And finally,​ after you’ve compared lenders and made the​ decision that a​ second mortgage is​ the​ best choice,​ pick your lender and keep up with your payments .​
Remember,​ since you’re borrowing against your home with a​ second mortgage,​ you​ are putting your home on​ the​ line.
A second mortgage is​ a​ sensible solution to​ acquiring funds for school tuition,​ home repairs and renovations,​ and even vacations and cars .​
But before you​ run out and get a​ second mortgage,​ you​ need to​ weigh the​ benefits and disadvantages of​ a​ second mortgage,​ and determine if​ the​ reason for getting one is​ worth borrowing against your home.

Understanding A Second Mortgage

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