3 Things to Consider Before Getting a Second Mortgage
Getting a second mortgage can be an excellent idea if you want to capitalize on the equity of your home in order to pay for important things like home expenses or debt consolidation. But before deciding to get a second mortgage, consider the following three things:
Getting a Second Mortgage Is Great for One-Time Payments
If you need to pay for home repairs or consolidate your debt, then this is oftentimes a great option because the interest rates are relatively low compared to credit card loans or unsecured loans. Typically, second mortgages offer fixed interest rates and monthly payments without any annual fees. This is worth looking into if you know what you want to buy with the money and have a plan for repaying it soon.
Defaulting on a Second Mortgage Could Result in Foreclosure
Just like your current mortgage, your second mortgage uses your home as collateral. Don’t make the mistake of thinking that if you pay your current mortgage faithfully and skip out on payments on your second mortgage that everything will work out in your favor. Keeping up with both payments ensures that you will not get foreclosed on.
A Second Mortgage Can Be Risky if The Value of Your Home Drops
In today’s economic climate, this is a widespread concern for homeowners. If the value of your home is decreasing, then you might have the misfortune of owing more on your mortgage than your house is worth. However, if you don’t need to sell your house anytime soon, then this likely won’t be a problem—just wait it out while the housing market continues to recover and enjoy the spending leverage you’ll get by taking out a second mortgage.
Although a second mortgage can be risky, it has many advantages over other loans. If you want assistance in weighing the pros and cons of a second mortgage or even refinancing your home, then Nelson Sousa would be glad to help. Contact us anytime to speak with a knowledgeable, friendly member of our professional staff!