A second mortgage is simply an additional mortgage secured by your property. As a homeowner with equity in your home you might consider using a 2nd mortgage to pay off high interest debt, pay for college tuition, or renovate your home. The advantage of a 2nd mortgage over a home equity line of credit is that you will receive your money in one lump sum. You can find 2nd mortgages with fixed interest rates that will allow you to make set payments over a period of time like your first mortgage. Fixed interest rates are the main advantage over home equity lines of credit that come with variable interest rates. Second mortgages have tax advantages as the interest is fully tax deductible. Should you choose a second mortgage or refinance your current mortgage with cash back? The answer depends on your situation. If you have good credit and can find competitive interest rates you would save money by refinancing. If refinancing your current mortgage is not an option a 2nd mortgage will allow you access to the equity in your home. Keep in mind that 2nd mortgages typically come with higher interest rates than your primary mortgage because of increased risk to the 2nd mortgage lender. Home equity lines of credit offer greater flexibility than 2nd mortgage loans. Most lenders offering home equity lines of credit offer checks or a debit card to access funds. This would allow you to borrow only what you need, preserving equity in your home. |
