Second Mortgage

When Should You Take Out a Second Mortgage

A second mortgage is an additional loan that you take out on home you already have mortgaged with a lender. This can be the same or a different lender depending on your requirements. People take our second mortgages for different reasons but usually when they need extra funds for a specific purpose.

By using the home equity you have already established, you can raise the extra funds that you need to refinance your mortgage. You might wish to make home renovations, need money to send the kids to college or want to take a round the world trip. Or perhaps you need some capital to start a new business. These are all very common reasons for taking out another mortgage.

A second mortgage is a simple transaction and works by acting as a secured loan on your home, using your home as the collateral or security. But beware - this is not a good option for people who are at risk of missing or being late with the larger monthly payments, as it can increase the risk of you losing your home if you default. However, for people who can accommodate the additional payments, a second mortgage is the ideal option.

It is important to know that second mortgages do carry a higher interest rate than first home mortgage loans. However the interest rates are better than those of a unsecured or low doc loan and so depending upon your home's value, second mortgages allow you to borrow larger amounts of money than the more traditional or difficult loans.

A second mortgage is an ideal financial solution for people who want to simultaneously own their own home and consolidate their debt. To do this you should link up with a professional mortgage broker and explore your own options, specific to your situation.