Your Second Mortgage Loan Acts A Lot Like Your First Mortgage

Category: Finance, Mortgages.

A second mortgage, or a home equity loan, is a good option if you ve got climbing debt and some equity built up in your home.

You can use the funds from your second mortgage or line or credit in order to pay off debt, do home renovations or consolidate your bills. Taking out a home equity loan or a home equity line of credit may be a viable solution for you, but only if you find the right second mortgage interest rate. However, if you re using it to pay off debt and you don t do anything to adjust the way that you have been spending money then you ll end up overspent again in just a few years. Take out the second mortgage but also start using a family budget and control frivolous spending. Don t think of a second mortgage as a band- aid to a bad spending habit. That being said, getting a good second mortgage interest rate is definitely possible even in today s market where interest rates are starting to climb.

If you have an older home, it s still a good time to take advantage of the equity built up in your home. Even with the increases, they are still lower than they were ten to fifteen years ago. Getting a good second mortgage interest rate is easier than applying for your first mortgage. Since you have the collateral of your home you represent a lower risk to the lending institution. With second mortgages, there isn t quite as much paperwork, or as much time to wait for approval. There are two types of second mortgages to choose from: the second mortgage loan and the second mortgage line of credit. You receive a lump sum of money.

Your second mortgage loan acts a lot like your first mortgage. The second mortgage has lower closing costs than the first, but you are also paying a higher interest rate with the second mortgage. The interest will change depending on the month, which can be really great when interest rates are low like they have been lately, but difficult if they are high. The second mortgage line of credit acts like a credit card with a standard credit limit, but a line of credit has a variable rate. You can use your line of credit as long as you have funds, but there is a cap to how much you can spend. Up until that point, you can pay off as much or as little as you d like to each month. At a certain period of time, 5, 10 or 20 years in the future, you won t be able to borrow on the line of credit any longer and you ll have to start making standard monthly payments.

Just like with your first mortgage, you ll want to shop around to get the best second mortgage interest rate. Determine whether a loan or line of credit would be best for you, and then take steps to improve your overall financial picture by using the equity in your home.