A second mortgage is a great option if you already own a home and need extra money. This allows you to tap into the equity of your home so you can get a sort of personal loan. However, the interest rate will be a lot lower than if you got an actual personal loan, which can even be higher than the average credit card.
Second Mortgage – Advantages and Considerations
As it sounds, this kind of loan is when you already have a home available. In this case, the property is actually used as a type of collateral in case you default and don’t pay anything. In that sense, it can be used for anything. This includes using the money for medical expenses, investing in a new business, taking college-level courses, and much more. If you need a large sum of money in a short amount of time, this is something to consider.
This kind of financial tool is different from a refinance in that instead of having one amount of debt based on the property that you have to pay, you have two. Basically, you’ll have a monthly payment for each one. However, the first lender has priority in the case of foreclosure. The second lender isn’t guaranteed anything if the value of the property isn’t big enough to cover both debts.
You can get two forms of debt with this kind of mortgage. The first is a home equity loan, in which you receive a lump sum of money that you can use for anything. Usually, the terms start at 5 to 30 years. Another debt you can get is the home equity line of credit. You can even use checks for this debt and the interest rate is probably lower than your credit cards.
There are many advantages when it comes to taking out a second mortgage. As long as you use it for something you need or something that will make you more income, it’s a great idea.