| If you need extra money for home improvements, | | | | mortgage too. You can probably expect the rate to be |
| debt consolidation or even to purchase an additional | | | | a bit higher because it is riskier to the lender who |
| home then a second mortgage might be exactly what | | | | knows that if a default occurs the primary mortgage |
| you are looking for to make that happen. However, | | | | gets paid first and then the second mortgage. You can |
| when you hear the term second mortgage you might | | | | also be choosy about a second mortgage so check |
| not be sure exactly what it means. To put it simply it is | | | | more than one source when trying to make a decision. |
| just another mortgage on your existing home. Basically | | | | Watch out too for balloon payments, which is a |
| you are borrowing money for one or more reasons | | | | payment that starts out low and rises as time goes by. |
| and using your home as collateral. | | | | If possible, choose a fixed interest rate. Also be aware |
| The term "second" means that the loan you are taking | | | | that second mortgages, like any other loans, have |
| out does not have priority on your home if for some | | | | additional closing costs. There are the appraisal fees, |
| reason you can't pay it back on time. In all cases the | | | | application costs and other closing costs that can be |
| initial mortgage on your home would be paid before | | | | as random as title searches. |
| any money would go toward a second mortgage | | | | At the Mortgage101 they say, "Many companies will |
| payment. With that being said, the next question is why | | | | charge a fee for lending you money. The fee is usually |
| in the world someone would put their home up as | | | | a percentage of the loan and is sometimes referred to |
| collateral for money. Well, the answer is that you | | | | as "points." One point is equal to one percent of the |
| shouldn't unless you are in a situation where you need | | | | amount you borrow. For example, if you were to |
| a large amount of money fast. | | | | borrow $10,000 with a fee of eight points, you would |
| Western Vista Federal Credit Union in Wyoming notes | | | | pay $800 in "points." The number of point's mortgage |
| that a "second mortgage is what it says - the second | | | | companies charge varies, so it may be worthwhile to |
| loan against a specific piece of property. Consider this | | | | shop around." |
| example: Let's say you have a first mortgage on your | | | | You also want to make sure you get a second loan |
| home. The value is $100,000 and you have a $60,000 | | | | that allows you to keep your first mortgage. |
| balance left to pay on your loan. The $40,000 | | | | In the long run second mortgages are a good bet for |
| difference is considered equity, or the part of the | | | | home improvement financing and some second |
| home that you own outright. If you wish to further | | | | mortgages can even be extended for up to 20 years. |
| borrow against that $40,000, you would be taking out | | | | Remember though, it's not only home equity lines of |
| a second mortgage on the home in order to do so. | | | | credit that don't outline the amount of the monthly |
| Why borrow against this equity? In many cases, the | | | | payments so read your contract. There are many |
| interest rate you pay on your mortgage is lower than | | | | second mortgage loans that don't either. Joe Prussack |
| many other types of loans. Interest is also frequently | | | | notes, "Everybody loves low monthly payments... |
| tax deductible for a first or second mortgage, but not | | | | These popular 2nds' (second mortgages) also usually |
| necessarily for a car loan or a credit card." | | | | have adjustable rates so these loans aren't for the |
| When a person borrows money against their home | | | | faint hearted." In this case, if you are one of the |
| that's a large chunk of change being used for collateral | | | | fainthearted then stick with a fixed interest rate versus |
| and it also allows the borrower to get a bigger loan. | | | | one of the variable interest rate loans. This way you |
| There are some disadvantages to second mortgages | | | | will know exactly what payments are expected each |
| such as the fact that you are taking a chance with | | | | month be it for a second mortgage or another type of |
| your home should something happen and you have | | | | loan in order to secure a big ticket item that you have |
| trouble paying the second mortgage back. | | | | needed for the past few years. |
| Take a look at the interest rate on a second | | | | |