Most people don’t think of second mortgages as something that could be useful in a lot of different situations. It’s a way to get cash quick, to pull equity from your strongest asset and to solve short-term financial problems.
With any loan or situation where your home will act as collateral, it’s best to know the right time to consider this option and why it can be promising under the right circumstances.
What is a Second Mortgage?
This is a good place to start. A second mortgage is a mortgage taken out on a property that is already mortgaged. It uses your home as collateral and secures a loan like when you first purchased your home. The processes for both are similar.
What can a Second Mortgage be used for?
Once approved, it’s your money and can be used in any way you see fit. This doesn’t mean that all uses of a second mortgage are created equal, but it’s a lump sum for you to spend.
When Should Someone Consider a Second Mortgage?
There’s a lot of good reasons to consider applying for a second mortgage. The first thing to consider is whether there is enough equity built into your home. If you’ve been paying off your mortgage for several years, it’s a good bet that there is.
Second mortgages are effective if you need a large sum of money and the popular reasons to apply are home improvements, debt consolidation, education or medical expenses. By no means, are these the only reasons though.
Are there Different Types of Second Mortgages?
Second mortgages can come in the form of a line of credit or as a more traditional loan. It comes down to what the applicant is more comfortable with as there is no right type.
Second mortgages shouldn’t be viewed as scary or that different from other methods of borrowing. Although there’s interest, it’s a way to access funds when needed and to leverage the investment of your home.
As with anything of this nature, it is always best to speak with a trained and knowledgeable professional.