With mortgage interest rates low, it makes sense to consider a second mortgage if you have equity in your home. It is a desirable solution if you have credit card debt and other high-interest debt to pay off using those funds. Before you run down to your bank to discuss obtaining a second mortgage, there are few things that you should know.
- There are two types- A closed second mortgage provides a lump sum that you’ll make a monthly payment on until paid off. A revolving home equity loan (HELOC) works much like a credit card. You use the funds when you need them and then pay them back as disclosed in your agreement.
- Consider the future- A second mortgage secured by your home is due when you sell it. If you plan to be in your home for several years, you will have time for the equity to increase again. Plans to move soon might prove difficult if the market were to drop below what you now owe on a first and second mortgage.
- Consider interest-only payments- Some second mortgage products allow you to have a monthly payment of only the interest. Although not always a good idea, it can be worth considering if you are fixing up your home to sell it or are renegotiating your primary mortgage.
- Understand the fees- Work with a mortgage broker to secure the best possible second mortgage, considering fees and terms beyond just the interest rate.
A second mortgage can be an excellent tool for achieving your financial goals when used wisely. At Donna Mullen & Associates, we know the ins and outs of how a second mortgage works, why private lenders are often the best option, and how to navigate the fine print that could negate the benefit you hope to achieve. Education is key when dealing with any mortgage product. Let us help you get where you want to be without any wrong turns.