Pros and Cons of a Second Mortgage
Making huge long-term financial decisions can be difficult. You have to decide whether the second mortgage is worth the price. Before you put your home on the line, understand how second mortgages work, their cost and their downsides.
The undeniable benefits of a second mortgage
A home is an asset, if you understand its value and use it for your advantage. By getting a second mortgage, you are borrowing against the value of your property and use it to finance your financial needs or goals.
You are simply using your home as collateral –again, just like the first time. But, this time-you are securing the loan with your lien on your home. By tapping into the equity in your home, either through payment on the principal or improvement of the economic conditions, you can avoid paying high-interest rates on unsecured loans.
- You can borrow large loan amounts, depending on your equity, which can be as high as 80% to 105% of the price of the home, because it is secured against your property.
- Enjoy lower Interest rates. In some cases, you can get single digit interests, because your home equity reduces the risk to the lender
- Mortgage interest deduction on your taxes. You can enquire at the nearest tax office about the possibility of tax deductions on your second mortgage.
Put the proceeds of your second mortgage towards something that will improve your financial standing like home renovation and exert effort to repay the loan diligently. You can also use the second mortgage to consolidate your debt, to get a lower rate, and settle your multiple debts once and for all.
NSW Mortgage Corp allows you to access cash quickly with reasonable interests. You will have the ability to access a huge amount of cash to help you with a variety of expenses, such as business costs, child’s tuition fees and other expenses that can’t wait, without dipping into your savings.
Applying for a second mortgage is a long and complicated process. Banks treat it as a risky loan, so they require a lot of paperwork and screening. It is also difficult to get approved for a second mortgage, and there are additional costs and fees and taxes that you have to deal with, such as –
- application cost
- appraisal fees
- closing cost
Of course, there’s the risk of foreclosure if you fail to repay the loan. So, before you send your loan application, watch out for balloon payments, duplicate insurance coverage and prepayment penalties that prevent you from being free from debt early.
The Second Mortgage Solution
Second mortgages, just like any other secured loan comes with potential risk. That’s why it is important to enquire about the loan terms before getting them. Ask as much as you can about the loan, especially with regards to interests that may accumulate overtime. Always put your equity to good use and not just on whimsical purchases. Remember that a second mortgage is worth the risk and fees if it is appropriate for your needs and financial situation.
Contact NSW Mortgage Corp today to learn more about the pros and cons of second mortgage.