|
The Facts About Second Mortgages
By: Joseph Kenny
Your home: It's probably your biggest asset. Having a home to back you up when
you need a loan is one of the greatest advantages of home ownership. In recent
years, there has been a major increase in the amount of people looking to use
their homes as a way to get access to extra money when they need it most. One of
the best ways to do this is through a second mortgage.
A second mortgage is exactly what it says it is - a loan made in addition to
your first mortgage, and it's based on the amount of equity you have built into
your home. Many people use them to fund home renovations, to pay off credit
cards, or to put a child through college. Since you've already been through the
process once, the underwriting required to get a second mortgage is much simpler
than it was the first time around, and the cost of the transactions involved
will be significantly lower. This usually makes up for the fact that interest
rates on the second mortgage are a bit higher than they were on the first one.
On a second mortgage, you will borrow a fixed sum of money against your home
equity, and pay it back over a specified amount of time. The amount you borrow
will be combined with the amount you still owe on your first mortgage.
It all sounds pretty simple. There are just a few things to keep in mind. First
of all, don't take out a second mortgage on your home unless you've built up a
fair amount of equity in the property already- that is, made payments on the
original mortgage balance for a good amount of time. You may still be able to
get a second mortgage if you don't have much equity, but your rates will be so
much higher, and the amount you can borrow so much lower, that it will
essentially be a waste of your time and money. This is one of those things that
is worth waiting for.
Also, look into the other options of borrowing against the equity of your home,
including a home equity loan and a home equity line of credit. All of these
options allow you to borrow against your equity, but there are slight variations
among them that mean one of the three may be the best option for you. It will
depend, for the most part, on your particular financial standing, the amount of
money you need to borrow, and the amount of home equity you currently have.
About the Author:
Joseph Kenny is the webmaster of the loan information sites http://www.selectloans.co.uk/
and also http://www.ukpersonalloanstore.co.uk. At the Personal Loan Store you
can find all the different loan types explained.
|
