Do You Need a Second Home Mortgage?
Whereas a first mortgage helps you get a home, second mortgages help you refinance your home if you need money. You can use that money for renovations, tuition or car payments, or even to pay for a vacation. Keep in mind that taking out a second mortgage isn’t the equivalent of free money; you’ll be making payments on the loan over a fixed period of time and you’ll be paying second mortgage interest as well.
Essentially, second mortgages give you the equity of your home. That equity is the value of the difference between the balance of your original mortgage and the actual worth of your home. If your home is worth $300,000 and your mortgage balance is $150,000, then you have $150,000 worth of equity. The bank has a lien against your home, which means they can repossess the home if you aren’t able to make payments for second mortgage rates. The bank with the second home mortgage is considered the second in line for any proceeds or funds obtained through the sale of your home if you default on the loan.
One thing to keep in mind is that second mortgages are basically a second payment. You’ll still be paying off your first mortgage but you’ll have this additional lien on your property. This can be a downside, but shouldn’t be an issue if you are in a financially stable position. Again, different lenders offer different terms, so it helps to shop around. Taking out a second mortgage with the same lender who has your first mortgage might wind up helping you save a little in the long run, though isn’t a guarantee.
Be sure to think very carefully before you take out a second home mortgage. Look closely at the terms and conditions of the loan, like the interest rates and payment schedule to start, so you know what you’re getting into. Second mortgage terms may differ from the first, so be sure to note any differences and know what’s expected of you.
Getting a second home mortgage is a good opportunity to get money quickly, whether it’s for an emergency or something you’ve had planned. It comes down to making sure you understand the second mortgage terms, like your interest rate, monthly payments, and length of the loan, to name a few. Keeping up on payments for both the principle balance and second mortgage interest amounts will help you pay it down as soon as possible without incurring any additional fees or penalties for being too quick or taking too long.