Second Mortgages Help You Tap into Your Home’s Value
Sometimes the best way to get extra money if you are a homeowner is to tap into the value of your house as its price has probably appreciated over time and you have paid down what is owed. Second mortgages are a good way to get a large amount of cash for a low interest rate as well as deduct the interest on your taxes. This extra money can help start a business, pay for college, make home improvements, or consolidate debt.
Types of Second Mortgages
Second mortgages are a general term for a type of mortgage taken in addition to your original mortgage. These can include a Home Equity Loan, which provides you with a lump-sum payment and usually has a fixed interest rate over the loan’s life. A Home Equity Line of Credit (HELOC) works like a credit card, where you have a balance and an available credit line that is based on how you spend it and how fast you pay it back. This type usually has a variable interest rate.
Second mortgages consist of a principal and interest payment. These loans may be for a shorter time period and carry a different interest rate. Sometimes, a mortgage company requires that you use some of the money to pay off existing credit cards or other outstanding debts before they give you the rest of the proceeds. While it can be easier to get second mortgages, be careful of a prepayment penalty, which charges you a fee if you pay the loan off before the end date.
April 24, 2006