Home : The Second Mortgage vs. the First Mortgage

The Second Mortgage vs. the First Mortgage

A second mortgage is a loan taken after the first mortgage, and it is secured against the same assets as the first. It is based on the amount of equity or interest or ownership you have in that property, thus based on the difference between the current value of the property and the amount you owe on it. Second mortgages are arranged for various purposes, such as financing home improvements, college tuition fees, debt consolidation or other emergency expenses. If you have gathered enough equity, another option is to refinance your home and borrow funds in excess of your current loan balance. Usually, a second mortgage carries a higher rate of interest than a first mortgage. So if interest rates are low or start decreasing, refinancing becomes a more appropriate option. Since underwriting guidelines are less strict for second mortgages, it usually takes less time and effort to get a second mortgage than to refinance a loan. Also, a second mortgage may have low transaction costs, so despite higher interest rates on second mortgages, in the long run they may turn out to be less expensive than refinancing.

Mortgage mortgage interest rates for home

Home ownership has the benefit that it allows you to use your home as collateral and borrow needed money against it, by taking a second mortgage.

Up until a few years ago, lenders and banks had curtailed the amounts and restricted the circumstances that allowed you to get 2nd mortgages. In fact, a second mortgage was considered disgraceful and regarded as evidence that you were suffering from financial hardship. However, that situation no longer exists. There is now a wide selection of loans available to fit your needs, and it's much easier to get a second mortgage on your home.

Second mortgage interest rates

The 2nd mortgage interest rates on the market today are affordable, thanks to fierce competition. In some cases, interest payable is far below the prime lending rate, otherwise a conventional yardstick for second mortgage loans. Conversion of the equity or right of ownership of your home into a line of credit is now possible. This allows you to borrow against your property whenever you may need to. It is important to remember that your house will be pledged as security for such a loan, so you must choose the best financial deal and keep your budget limitations and long term income in mind.

Home equity loan basics

Home equity loan basics

For larger loads of debt, consider using a home equity loan. This is a fixed-rate, fixed-amount loan. You borrow the money in a lump sum, and make set payments over a certain period of time. Because you're locked into a rate, you don't have to worry about market fluctuations. It's ideal for large, one-time expenditures like home improvements or debt consolidation.

When you shop for a second mortgage, consider a number of different variables. Look for the lowest rates, the best terms, and the lowest closing costs. Make sure that your home equity lender also has a number of references and excellent customer service. Work with a bank or credit union that bends over backward for your business.

If you've built up a hefty amount of debt by spending a little too much time at the shopping mall, take comfort. You're not alone. Many Americans are in the same boat. However, just because others are in the same financial crunch doesn't mean that you shouldn't take action. Get yourself back on the right track by searching for a home equity loan. It's a smart way to pay off your debt, and get your own personal economy booming again.

Tax benefits of home equity loans

Tax benefits of home equity loans

A home equity loan is also beneficial because the home equity loan rate charged is usually tax deductible, as the loan is used for its primary functions. You can use our home equity loan calculator to check what various home equity loan rates will mean for your monthly payments. Always compare offers from several lenders and brokers to obtain the lowest home equity rate possible.

Furniture For Home: A home equity loan

A home equity loan allows you as a homeowner to get a loan by using the equity in your home as collateral. The equity consists of whatever funds you have invested in your property in order to own it or improve it.

Since it is a debt against your own property, which you are in actual possession of, a home equity loan is a secured debt. The property can be required to be sold if the creditor wants the money back that you have borrowed.

Contemporary Home

Contemporary Home