Getting a house mortgaged might not be the most positive financial act one can get into. However, it is undeniably a good option for certain cases. After all, buying house is definitely not as sweet as a piece of cake. It takes much sweat as well. There is a need for an ample sense of responsibility to avoid ill effects that can render people financially helpless in the long run. All these are just doubled with second mortgages.
A regular mortgage involves the purchase of a house with the use of money borrowed from a mortgage lender. A specified interest rate is arranged, and it is added to the whole amount borrowed. The borrower pays on a monthly basis for the computed amount to include the principal and the interest for up to 30 years. In case the loan does not get paid in due time, the property can be repossessed by the lender.
A second mortgage, on the other hand, is understandably as it is. It involves getting another loan where the same property is mortgaged for the second time around. Although this is most helpful in times of dire emergency, this is not recommended and should be highly avoided by those who can still do without it.
Basically, a default on the loan can lead to the house being completely sold, and the money getting its way toward the payment of the first loan. In case there is still a good amount after that, it goes to the payment of the second mortgage. There is a greater risk involved in a second mortgage, which makes it acceptable to have higher interest rates along with the plan.
With a second mortgage, it is possible to get the money needed even when the house is already on a mortgage plan. It is still possible to get another loan using the same property. More so, this option can help out deal with an existing mortgage in case there is the possibility of not being able to finish it as committed to. This is a great idea to help pay off the existing mortgage.
It is also a good source of financial support for making further home developments. Furthermore, there is an additional option to go for a Home Equity Line of Credit, which is quite similar to the basics of a credit card. Another good thing about this mortgage option is the possibility of lower interest rates, if the overall rates in the market are experiencing such a change.
On the other side of the spectrum, there are also some negative points associated with getting a second mortgage. It generally puts one's home at a greater risk. This is even greater if the drawn amount is more than the actual cost of the house. Bankruptcy can easily be around the corner. Yet another possibility is the large money involved as the chances of higher interest rates are greater than having lower rates.
Knowing both sides of the store, it is already up to the individual to judge on whether a second mortgage is a wise decision to make or something one should keep away from. |
