It seems that getting a second mortgage is very popular these days, but why are people getting a second mortgage, to begin with? Is it a safe or a wise decision to do it when you’re not yet paid with your first mortgage? We have answers (and more) below!
First, What is a Second Mortgage?
Investopedia defines a second mortgage as a subordinate mortgage that is approved while the homeowner has another mortgage in effect.
This type of mortgage is backed by your home; which is why it is required that you have some equity before you can apply for it. By applying for a second mortgage, you’ll be able to refinance up to 85% of your home’s value, freeing fund to use for other purposes.
It is the freeing of some funds that is the main reason why most people apply for a second mortgage. Once they are approved, they usually use it for the following:
It is no secret that you need money to make more money. In the case of investments, the bigger capital you put in it, the larger the gains that you can get.
For Further Schooling or Self Investment
Getting ahead in life for most people means needing to have the credentials for some positions, hence the need for further schooling. In some instances it is needed for a career change or just to be a better version of one’s self. Unfortunately school is not cheap and requires a significant investment on your part. If you qualify for a loan and have the means to pay the future monthly payments, why not go for it?
For Investing in a Second Property
Buying a second property for a vacation home, a rental, or an investment property requires some capital as most banks ask for a minimum 20% downpayment. Tapping into the equity of a home you already own allows you to come up with the funds for this quickly. By doing this, you van effectively grow your assets as long as you won’t default on your monthly payments.
For Paying Debts with a High Interest Rate
Credit card companies can charge as high as 30% interest on your balance. This is a lot of money that simply goes to the banks, burying you deeper in debt. By taking a second mortgage to pay loans like this, you can pay your way out of debt faster.
For Funding a House Renovation
Spring is just a few months away or perhaps you will want to get renovations done before winter. You will need a substantial amount of money to make this possible. Taking a personal loan for this purpose is usually met with a rejection but with a second mortgage, you can get what needs to be done completed by the time you want it. This is especially handy for repairs and renovations that preserve the home such as a roof replacement.
How to Get a Second Mortgage?
Getting a second mortgage is not as challenging as most may think more so if you get the help of a licensed mortgage broker. Our mortgage professionals at Mortgage Central Nationwide will help you throughout the process of mortgage application until you finally qualify for a loan. We will ensure that your mortgage will have the lowest possible interest rate and that the terms will be exactly what you can manage so you won’t fall behind on your monthly payments. Simply contact us at your earliest convenience.