2Nd Mortgage Loan A Better Home Equity Alternative

If you are uncertain as to which type of home equity loan is right for you, a second mortgage has many advantages over a home equity line of credit. Here is what you need to know when considering a second mortgage for your home.

There are a variety of different ways to borrow against equity in your home. Home equity lines of credit are a popular option due to their ease of access to cash; however, this credit line is a more expensive option. rate of interests have been rising significantly the past few years. Home equity lines of credit come with variable rate of interests; recent rate of interest hikes could result in significant increases in your monthly payment amount for an equity line of credit.

Second mortgage loans have the advantage of coming with a fixed rate of interest. If you have a large amount of equity in your home and need to borrow a sizeable amount of this equity, a second mortgage makes sense over the equity credit line. You would have fixed payment amounts you could spread out over a large period of time. These payment amounts would not change due to rate of interest hikes at the hand of the Federal Reserve.

It is significant to remember that a second mortgage is secured by your home just like your first mortgage. If you fall behind on the payments on the second mortgage your mortgage lenders could foreclose even if you are not behind on the first mortgage. This is why it is significant to budget accordingly and never borrow more than you need. You could use the proceeds from this second mortgage for any reason; however, just because you could borrow against your equity does not mean you should. If you acquire in trouble making the payments on either mortgage you could lose your home.

Shopping for a second mortgage is no different than shopping for your first mortgage. It pays to do your homework and research a variety of home equity lenders before applying. Doing your homework would assist you avoid many of the mistakes homeowners make when applying for a home equity loan; to learn more about avoiding these common mistakes, register for a free mortgage guidebook.