We’re often surprised that many homeowners don’t know about second mortgages.
First a second mortgage is like the name says, a loan in addition to your primary mortgage, that allows you to borrow money using your home as collateral and the first mortgage is not yet paid off. The second mortgage also like the name says, is second to the original mortgage. In case of default, the first mortgage is paid off first. As such the interest rates are generally higher than first mortgages but amounts borrowed are usually much lower, as well (of course you will need to have equity in your home to qualify for a second mortgage).
One benefit of a second mortgage is getting money needed for expenses, such as tuition or renovations at an interest rate that while higher than first mortgages is much lower than credit card interest rates.
Most second mortgages are in the type of a home equity loan or a home equity line of credit (HELOC). The home equity loan is a lump sum payment of money that is then paid off monthly like your first mortgage.
HELOCs are more like a credit card where you will be approved for a line of credit based on the equity in your home and then you can borrower against that.
If you are interested in learning more file out our loan analyzer on our website or call and we can analyze your situation to see what best fits your needs!
