Seeking a second mortgage is a decision requiring careful consideration. Reviewing your current financial position and all your options is your first step. A quick conversation with an experienced credit union mortgage loan officer will provide the guidance you need. If you are already managing a large debt or stretching your paycheck to cover bills, it may not be the best time to take on a second mortgage. Adding additional monthly payments, may put your mortgage property in jeopardy. Also keep in mind, with higher interest rates, the interest on a 2nd mortgage or home equity line of credit may be notably higher than your primary mortgage rate, which may also affect are ability to repay the loan.
Before you jump into a second mortgage loan, let’s start with the most common solution. Have you considered refinancing your current mortgage? This option does have many advantages, but if your first mortgage is locked in at an attractive, lower rate, refinancing to a higher rate could end up being a costly mistake. If it appears a second mortgage is a good fit and your best option, there are several situations where an equity loan could be a great asset to you.
Equity in your home is accessed in the form of cash and cash can be used for whatever you chose, but commonly the funds are targeted to pay off debt, home improvements, start a business, fund investments, or cover the cost of an important event such as college, a wedding, or a vacation.
If you’re looking at remodeling your house, whether in preparation to sell or for much needed upgrades or repairs, a second mortgage is a good loan to consider. Any type of remodel to your home or property typically increases your property value. If there are plans in the future for selling, an increased property value means you could sell the house for more than your initial mortgage.
You could pursue the purchase of a second home with a second mortgage if that is part of your financial goals. Whether you intent to rent out your current residence and move into the new one, use your second home as a summer or winter residence, or to buy it as a gift for a family member, it is possible to do so with this loan. Even though there are some risks involved with this option, if you manage your finances carefully, it can be a good investment opportunity.
There are many different reasons for accessing the equity in your home and utilizing a second mortgage is a viable option to consider. If you are still unsure how a second mortgage fits into your financial future, it’s best to reach out to a Mortgage Lender at Dakotaland Federal Credit Union for sound advice.