Second mortgage is a loan that is secured against the equity of home. When a second mortgage loan is obtained, the lender would place a lien on the house. This lien would be recorded in the second position soon after the first mortgage loan lenders lien, thus the concept second mortgage.
Loan mortgage second/ Second mortgage loan is also known as a home equity loan. However, the only difference between the two is that they are different terms for the same subject.
Second mortgage loan would be a great way of borrowing money when you are in great need. A second mortgage loan would not have a priority on the home if you would default on loan that is unlike a regular mortgage. The first mortgage loan would be repaid back with your homes value even before the funds would go towards the payment of the second mortgage loan. When you are in desperate need of money, a second mortgage loan would be a great option. Two mostly likely issues that would warrant your second mortgage loans are debt consolidation and huge home improvement project. As second mortgage loan is easy to get, it could be tempting. However, remember if you fail to repay the loan, you would have to wash your hands off your home.
Interest rates and fees
Typically, a second mortgage loan comes with much higher rates of interest than a first mortgage. This is mostly due to the event of default. Until and unless the first mortgage is paid off, the second mortgage would not receive a payment for homes value. This would be a little more risky for the lender. The fees associated with a second mortgage loan are comparatively higher. However, sometimes the high fees could also discourage you from taking a second mortgage loan depending on the amount you need and purpose too.
Second mortgage could be at an adjustable rate or at a fixed rate. The terms and the interest rates of a second mortgage loan would differ from one lender to another and from one program to another. Thus, it is advisable to shop around before obtaining a second mortgage loan. Compare the interest rates offered by various lenders. This would allow you to find the best lender.
The loan could be used for about anything. Many consumers would take out the second mortgage loan in order to consolidate the debt and make improvements or pay off their childrens college education. Whatever you decide doing with the loan proceeds, remember that a default on the payment could make you lose your home. So make sure that you take the loan for a worthwhile purpose.
Another advantage of second mortgage loan is that the interest that you would require paying back on the obtained loan is deductible. You can consult your tax advisor in regards with your personal situation. However, for most of the cases, the interest would be hundred percent deductible as long as the value of the first and the second mortgage loan would not exceed the value of your house.