Did you know that in 2017, 63% of homeowners had a mortgage payment?
With so many people having a current mortgage, many don’t know that they also have access to taking out a second mortgage.
Have you been considering taking out a second mortgage?
Do you think it might be the right choice for you? Keep reading for 3 signs you should get a second mortgage.
What Is a Second Mortgage?
First, let’s clear up what is a second mortgage in case this is a new term or you’re not too familiar with what it entails. When you take out a second mortgage, you are taking out a loan based on the current equity of your home.
This is a debt that has to be paid back and because it’s a loan that’s backed by your house if you don’t pay it back you lose the house. Make sure that you are able to afford taking out this loan before proceeding.
3 Signs You Should Get a Second Mortgage
Taking out a second mortgage shouldn’t be taken lightly it’s important to do your research to find the best rates and make sure you take a good look at your finances. Take a look at this useful info when making your decision.
There are many reasons that people take out a second mortgage including:
1. Credit Card Debt
If you’re dealing with a ton of credit card debt, have stopped using your credit cards, and want to pay them off quickly, a second mortgage can help. This is a great option only if you are not using your cards because the last thing you want to do is pay off your cards and max them out again.
Using a second mortgage to pay off your credit card debt can save you thousands of dollars on interest because a second mortgage loan will have much lower interest rates than your credit cards. It will also put everything in one monthly payment vs multiple payments if you have more than one credit card.
2. Home Improvement
If you have a ton of home improvement projects or renovations that you have been wanting to tackle, a second mortgage can help. If you’re looking to sell your home in the near future, these improvements can increase the value of your home and give you more equity when you sell.
3. Avoiding Private Mortgage Insurance
If you don’t want to pay private mortgage insurance (PMI) (which is that monthly fee for having a down payment that was less than 20%) a second mortgage can help avoid that fee. Taking out a primary mortgage for 80% of the loan and then using home equity and a smaller down payment can help you eliminate paying the PMI altogether.
The key when doing this is to make sure that the PMI fee isn’t less than the cost of taking out the second mortgage.
Do Your Homework
Like with any other loan it’s smart to do your homework before taking out a second mortgage. You don’t want to put yourself in a situation where you will default on your loan.
Have you been considering any of the above? Then it’s a sign that you might want to start looking into a second mortgage.
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