Second Mortgage Loan
A second mortgage is a loan that is secured by the equity in your
home. When you obtain a second mortgage loan the lender will place a
lien on your house. This lien will be recorded in 2nd position after
your primary or 1st mortgage lender's lien, hence the term second
mortgage. A second mortgage is also sometimes referred to as a home
equity loan. There is no difference between a home equity loan and a
second mortgage. These are just two different terms for the same
subject. A second mortgage can either be a fixed-rate loan or an
adjustable-rate credit line. Interest rates and loan program terms will
vary from lender to lender so it is important to shop around and compare
before committing to any one offer.
A second mortgage loan is ideal when you just want to tap into your
equity, plan to move soon, or are unsure about the amount you want to
borrow. Another plus of a second mortgage loan is that the interest you
pay back on the loan may be tax deductible. Consult your tax advisor
regarding your personal situation but in most cases the interest is 100%
fully deductible as long as the combined loan to value of your 1st and
2nd mortgage do not exceed the value of your home.
Loan proceeds from a second mortgage loan can be used for just about
anything. Many consumers take out 2nd mortgage loans to consolidate
debt, do home improvements or pay for their kids college education.
Whatever you decide to do with your loan proceeds it is important to
remember that if you default on your payment you can lose your home so
you will want to make sure that you are taking the loan out for a
worthwhile purpose.
A second mortgage loan aren't for everyone. You should weigh the cost of PMI and payments when choosing your financing options. Borrowing more
than 80% of your home's value will subject you to private mortgage
insurance. Your monthly payments should also be a factor in your
decision. By taking out equity when refinancing your home, you will have
a lower payment than if you had both a mortgage and 2nd mortgage
payment. Also, if you refinance in the future, you will have to pay off
your 2nd mortgage. by Daniel Reed |
