The Basics of Getting A Second Mortgage To Pay Off Your Debt
Second mortgages are loans that you can take in order to get some cash out of your home’s equity. This is done to pay off any high interest debts, the tax man, or any emergency expenses you may have. This type of a mortgage allows you to borrow against the value of your house.
A second mortgage can look like various types of loans:
- A Lump Sum: a onetime loan given by a lender that can be repaid over the course of a set timeline. All you have to do is keep up with the fixed monthly payments.
- Line of Credit: not exactly a second mortgage but still a loan agains your property. Line of credit can be referred to as a pool of money that you can tap into when needed. You don’t have to use the money but you can be assured that if the need arises, it will be available.
The two advantages of a second mortgage vs a regular loan.
There are 2 main advantages of obtaining a second mortgage:
- Increased Amounts
When you opt for a second mortgage, you can borrow a larger sum of money because of the fact that the loan is based on an asset; your home and its market value. Depending on the value of your house, and the lenders flexibility, you may even be able to secure up to 80 percent of the total value of the house through a second mortgage.
- Low Interest Rates
Majority of the times, second mortgages will have drastically lower rates of interest vs any unsecured credit (such as credit cards, tax debt, etc) because the loan is secured through the value of your home. This drastically reduces the risk factor that is felt by lenders and allows them to become more lenient when it comes to interest. Chances are you may get rates that are in single digits.
For more information on 2nd mortgages search for your local mortgage broker.