What is a Second Mortgage?
Many people use second mortgages as loans for large expenditures that are otherwise difficult to finance.
A second mortgage is an added mortgage to your home, while the first mortgage is still in effect. Second mortgages affect the equity portion of your home, which is built up through monthly mortgage payments or market value increases.
People may take on a second mortgage to fund their child’s college education, purchase a vehicle, do renovations, consolidate debt, etc. Depending on your financial situation it can be a great or not so great financial decision. The key is to analyze the outcome.
Second mortgages come with higher interest rates than first mortgages. If the owner defaults on their payments, the home is sold to recover losses. The first mortgage is paid out from the home sale proceeds before the second. This makes second mortgages a higher risk to the lender, thus charging higher interest rates.
If you’re considering a second mortgage, contact me for an appointment and we’ll see if it’s the right decision for you!