A second mortgage grants homeowners the ability to borrow equity from their home to gain financing. These funds can be used to pay bills, enhance the property and more.
The second mortgage is connected to the equity your current mortgage has built up, so it’s crucial to understand the ins and outs of a second mortgage before deciding to use it.
Advantages & disadvantages of a second mortgage
Advantages
- Lower interest rates in comparison to standard lines of credit.
- More financial wiggle room to invest in larger home renovations.
- You can use your homes’ equity without having to refinance the original mortgage.
Disadvantages
- Your mortgage lender may require a high credit score and debt-to-income ratio to qualify.
- Your home may be at risk if the home equity line isn’t paid back within contract guidelines.
- If you decide to sell your home, you may make less profit.
How do I get a second mortgage & what should I expect?
To take out a second mortgage loan, most lenders require a decent amount of equity to be built up on your home which is the amount you’ve paid towards the principal balance (the cost of the home plus interest).
After taking out the second line, you’ll need to have at least 20 percent equity still built up on your home. If you need this money fast, please note, it takes a few weeks for lender approval and the loan comes with fees.
If you’re unsure a second mortgage is for you, speak with your lender to explore your options and make adjustments as needed.
About the Author
Raena Everett
Raena has an exceptionally positive outlook on life. She believes every day presents a new and exciting adventure. She also applies this attitude towards her work. She was raised in Bangor, Maine until she moved to Venice in 2011. She graduated from the University of Maine at Orono with a bachelors degree in public management. She has been an entrepreneur her entire life, owning several small businesses in Maine. She contributes her success to her problem solving skills and her commitment to excellent customer service. These skills will easily carry over to her real estate career. Her market knowledge and customer service will provide great service to her real estate clients.
She is currently a Realtor(R) for Coldwell Banker Residential Real Estate in the Venice office.
