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 mortgages are 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 mortgages 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.
About the author:
About the Author
Daniel Reed is the author of
How to obtain a second mortgage loan?. He
is the chief editor for
http://www.funinusa.com .
