Posted on: 20 November 2015
If you are strapped for cash, you might be thinking about refinancing your home and obtaining a second mortgage. As the name suggests, a second mortgage uses the equity in your home to provide you with extra cash. Like a traditional mortgage, the bank uses your home as collateral and if you don't make your payments, the bank can take your home from you.
While a second mortgage might sound like the perfect opportunity to get some extra money, it's not ideal for every situation. However, a second mortgage can be great for any of the four following circumstances:
1. Home Renovations
If you want to upgrade your home, but don't have the funds to do so, a second mortgage might be a good idea. This is because you will actually be adding value to your home, which will make it worth much more than your initial loan. It will also increase your chances of selling your home later, if you are interested in doing that.
You could also use the funds increase the curb appeal of your home. Some landscaping, new paint, or a new roof can really add to the value of your home. It will also make it more aesthetically pleasing, which is a win-win.
Finally, if your home is in dire need of repairs, a second mortgage is a good idea. With the funds available, you can make your home safer by fixing the foundation, repairing the roof, or replacing the subfloor—whatever repairs your home needs. Plus, fixing any outdated or worn areas will also increase the value of your home.
2. Debt Consolidation
If you are feeling overwhelmed by debt, a second mortgage might the perfect solution. The money obtained from the mortgage can help you pay down—or pay off—any high interest loans, such as credit cards. It can also help you pay back items in arrears, or items that have gone to collections. This will help increase your credit score and reduce the number of payments you make each month, which is great for your monthly finances. Just make sure that you can actually make your mortgage payments on time, because you are putting your home up as collateral.
3. Purchase Another Home or Building
Another reason to consider a second mortgage is for new home or building purchases. You can use the funds obtained to purchase a second home—or building—outright. You could also use the funds to help you make the down payment and cover the closing costs.
Finally, you might also consider taking out a second mortgage to help pay for your child's college tuition. After all, college is expensive; and unless you have been saving, you probably don't have the funds necessary to pay for your child's education. However, a second mortgage will allow you do just that—without putting yourself into severe debt.
As you can see, there are several reasons why taking out a second mortgage is a good idea. If you are interested in learning more about the process, or its benefits, talk with a mortgage lender like Doolin Security Savings Bank in your area.Share