Second Mortgages: The Advantages and Disadvantages of Second Mortgages

2007-06-20 15:49:53

( Financial )



A second mortgage is just another mortgage applied on your home which is a secured loan against your property. The word “second” means that your home is not prioritized by the loan once you miss a payment. Rather, your initial mortgage is prioritized and would be settled prior to any funds transferring to the current mortgage.

Advantages of Second Mortgages

Your credit card might not be offering unlimited credit, and it might be hard to make the card accessible at all times.

With a secured loan against your property, you may be entitled to apply for higher loans. Likewise, second mortgages may enable you to qualify for higher loans because borrowers considers a loan against a property free from any risk.

Disadvantages of Second Mortgages

The chief disadvantage of second mortgage rates is that your home is put in jeopardy by applying for one. Consider this: if you can't repay the loan, second mortgages can be dangerous. Ensure that the funds you will use are worth taking the risk by utilizing a second mortgage.

Another fall back of the 1st 2nd mortgage is that they have a slightly bigger rate compared to the original mortgage rate. The main reason is that the second mortgage will not be settled until the original mortgage is fully paid. Due to the risk of such, they are rated higher. But, compared to credit cards, they have a reduced rate.

Lastly, higher charges on your second mortgage will have to be paid. Depending on the amount and duration of loan, a second mortgage may not be effective basically because of the charges.

Applying for Second Mortgage

Second mortgages can be found nearly everywhere. A good suggestion is to look for a second mortgage with an organization where you have a current loan such as your current bank or credit union. Perhaps, you can avail of the second mortgage with your current lender. In this manner, you can only hope for some savings on the cost.


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