Is a Second Mortgage a Smart Option?
The secret to getting the most out of your secondary mortgage is not entirely the amount, but how you use it to work for your best benefit. You know it is a smart option if you have the right reasons to obtain it.
Here are 4 common reasons why borrowers apply for second mortgage
(also known as a home equity loan)
Access your home equity
Whenever you find yourself in need of extra cash, the payments you made on your mortgage can actually be a life saver.
Your home is one of your most valuable assets, and you can use it to build additional wealth or pay for your immediate needs. The equity of your home is equal to the difference between its market value and the balance remaining on your mortgage. For example, if your home is worth $500,000 and you have $150,000 balance on the loan, your home equity is $350,000.
So, how do you build equity in your home?
You can have more equity when the value of the property increases and when the amount of your loan decreases.
The home’s market value goes up, in three ways:
- When home values in the market rises
- You did some home improvement, like updates in your bathrooms, kitchen, landscape or energy saving improvements. Addressing plumbing and roofing issues and other routine maintenance can also maintain the value of your home. Otherwise, unaddressed leaks and deterioration issues can decrease your home equity.
- Decrease of debt. When you have been paying your loan balance a little bit each month, and making extra payments when your finances are good, you’ll build equity overtime.
Pay off your credit debts
When you own a home, you can use your equity to pay for anything, including your credit debt, to avoid paying multiple credit cards. But, it is advisable to do this only when your second mortgage lender offers a better rate than the high interest credit cards that you would pay for.
Make sure to do the math to ensure that you can save money by doing this. While lower interest rate may seem to save you money, the fees of the second mortgage may cost you more than what you intended to.
Remember that your home is the collateral, so when you can’t pay your dues, there is a chance that you will lose your house. Since you are putting you house in the line to pay off your existing credit card debts, make sure that you cut all your credit cards or you create a budget you can stick with to avoid using credit cards unceremoniously.
Finance home renovations
Making home renovations can add value and comfort to your home.
Home modification is an investment that will eventually pay off, not only because it increases your equity but it ensures your safety, convenience and comfort in your own home. But, it can cost fortune; so a second mortgage can help.
Access funds quickly
If you need quick cash and you have no other sources, second mortgage can be your best option.
NSW Mortgage Corp can help you obtain a second mortgage to finance your most pressing needs. Give us a quick call at 1300 137 778 or Enquire Now so we can evaluate your application.