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Second Mortgage
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 Home Mortgage Lender provides information about second mortgageSecond mortgage goes by many names. Second mortgage can be called home equity loan, home loan, 100% home loan or 125% home loan or home equity line of credit. Second mortgage by any other name is still second mortgage. A first mortgage is a pre-requisite to a second mortgage. Most second mortgages are taken out in order for some sort of cash benefit.
Second mortgage can be used to pay for home improvements, buy a piece of property, pay down credit cards, pay for college or to pay for an auto loan. The one thing that a second mortgage should not be used for is a bank account. When a second mortgage is used to take the place of an ATM machine, usually trouble ensues and sometimes-financial disaster. Mortgage application |
Some people have to decide between taking out a second mortgage and taking money out of their 401K's in order to get the cash they need. Many choose to take money out of the 401K instead of a second mortgage because they think this is a better deal. For some it may be. But, consider that the true value of a 401K is the accrued interest over the long run that you may be giving up and all of a sudden, a second mortgage may look a whole lot better.
Second mortgage is not a cookie cutter contract. Some second mortgages can run for as long as 15 to 25 years and others have to be paid back after just one year. Second mortgage also has fees that are similar to first mortgages. Fees and points will go to the lending company for making the loan. In addition, second mortgage, like first can be at a fixed rate or a variable rate. Make sure you know which one you've signed up for when getting the loan. Mortgage application |
The two major types of second mortgages are home equity loans and home equity lines of credit (HELOC). Home equity loans are lump-sum loans and are generally amortized like most first mortgage loans. HELOC loans can be variable rate, continual use or future amortization. Variable rate loans fluctuate with the prime interest rate and are attract when the prime is low, but can be very unappealing when interest rates rise. Continual use loans can be accessed as long as there are funds. This is most like a credit card account with a credit limit. With a future amortization account, in some future date you'll no longer be able to withdraw funds and will have to start making monthly payments of principal and interest.
So, when is a good time to take out a second mortgage? First, take out a second mortgage only if needed and second, take one out when the prime interest rate has dropped at least one point below what you're currently paying. Like all rules of thumb, though, you have to know how to play your hand. Mortgage application
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