If you are in need of a lump sum of money and have equity built up in your home, then a second mortgage is often one of the best ways to get the cash that you need. Before you apply for a second mortgage however, it is important to know a few facts about them.
Fact #1: Second Mortgages are Best for Short Term Needs
The money that you get from a second mortgage may be spent on anything you choose, whether it’s for consolidating debt or paying for an emergency expense. The term on a second mortgage however is usually shorter than that of a first mortgage, so second mortgages are best suited to help you with short term needs.
Fact #2: Your Mortgage Broker is the Best Source for Your Second Mortgage
Even if you already have a first mortgage through a traditional lender, if you are in financial straits that lender may consider you too big a risk for a second mortgage. In this scenario, a private lender may be your best bet but you want to make sure that you work with a lender who is reputable. By arranging a second mortgage through your mortgage broker, it helps ensure that the lender that you finally end up working with has been vetted.
Fact #3: Refinancing May be a Better Option
The difference between a second mortgage and refinancing is that a second mortgage is an additional loan while refinancing means breaking the mortgage you already have and rolling the added debt into a new mortgage. To determine which option is better for you, your mortgage broker will compare the cost of potentially breaking your current mortgage to the interest you might save in refinancing vs. getting a second mortgage. The best option will vary according to circumstances.
Fact #4: You Should Have a Plan to Pay it Off
If you do opt for a second mortgage, it is important to consider how much extra you will be paying each month and develop a plan to pay it off. Second mortgages typically have higher interest rates than first mortgages, so it is to your benefit to pay it off as quickly as possible.
If you are interested learning more about second mortgages and would like help in determining whether this might be a good option for you, then contact Akal Mortgages today.
When we say YES! We stand behind our promise.®™