| Second mortgages are taken if you have any | | | | below: |
| home improvement plans or debts to pay off or | | | | - A second mortgage can be dangerous for your |
| simply put when you need extra finances. It is an | | | | home if you can't pay it back. |
| additional loan taken against the same property. | | | | - They have a higher rate of interest compared |
| Such loans are considered riskier and hence | | | | to a first mortgage. |
| lenders charge higher rate of interests on a | | | | - You may have to pay huge second mortgage |
| second mortgage. | | | | fees. |
| You may mistake second mortgage and refinance | | | | What are the types of second mortgage to |
| to be the same thing, but the truth is, they are | | | | choose from? |
| different. A refinance means that you are | | | | You can choose from the 2 types of second |
| renegotiating the terms of the first loan while a | | | | mortgages: |
| second mortgage means you are borrowing more | | | | 1. Home equity line of credit - This works in a |
| money against the equity of your property. | | | | similar format to a credit card where you |
| How must you use a second mortgage? | | | | (homeowner) will be given a line of credit based |
| Second mortgage is useful at times when you | | | | on the equity of your home. You will have to pay |
| need a lot of extra cash. Home equity can earn | | | | interests on the amount borrowed. This interest |
| you big loan amounts and hence most borrowers | | | | rate depends on the market index rates making it |
| borrow on the equity of their home. You may | | | | more unstable than home equity loan. |
| need second mortgage for: | | | | 2. Home Equity Loan - It is a set loan amount |
| - Avoiding Private Mortgage Insurance/PMI | | | | that is fixed for a said term and has a set rate. |
| - Creating a credit on the home equity line | | | | Second mortgages can be found almost |
| - Making home improvements | | | | everywhere. Lenders are willing to offer such |
| - Purchase of more homes | | | | loans as they can charge high rate of interests. |
| - Debt consolidation programs | | | | You may seek second mortgage from a lender |
| Are there any disadvantages of second | | | | you are already working with. There may be |
| mortgage? | | | | some rate cuts and may also be able to save |
| The disadvantages of second mortgage are listed | | | | some money on fees. |