Taking out a second mortgage can give you access to a considerable sum of money. However, is this the right decision for you? We know that you may have huge expenses such as college tuition or home repairs to consider. Please keep reading to learn about second mortgages. Our Florida foreclosure defense lawyers can provide guidance during a free consultation. Give us a call today.
What is a Second Mortgage?
When considering acquiring more debt, you may have looked into several types of loans and credit cards. While these are certainly options, you may find that taking out a second mortgage is a better option.
Second mortgages are liens that you take out against your home for which you already have a mortgage loan. Second mortgages are liens against the money you have already paid into your first mortgage.
Many people use second mortgages to expense things such as college tuition, home renovations, etc. The difference between using a credit card and taking out a second mortgage is the interest rates will be much lower for second mortgages. Theoretically, that would make it easier to pay off the debt.
Please keep reading if you want to understand second mortgages further.
How Does it Work?
The money you have put into your home from your first mortgage is called equity. Equity, unlike cash, is a valuable asset, and cash is a liquid asset, so you cannot leverage it.
Second mortgages let you use your valuable asset (your home equity) to leverage it for other expenses. Essentially you are taking that money you have already put into your home and making it available to yourself now. Deciding to pursue this may be right for you based on your circumstances.
You must be approved to take out second mortgages. The first requirement would be that you have built up your home equity. Your lender will decide what portion of your home equity you are allowed to leverage based on the value of your home, how much money you have put toward your first mortgage, and how much you have left on your mortgage.
Lenders will also look at your credit score and debt-to-income ratio, and these two crucial factors play into their decision to approve you for a second mortgage.
Refinancing vs. Second Mortgages
Refinances and second mortgages are very different processes. Refinancing your mortgage sets up your home equity as a lien which your lender can get if you go into default on your mortgage, but that is not the case for second mortgages.
Second mortgages are new loans that get added to your monthly budget. The lender for your second mortgage would not have access to your assets until after the first lender is paid back, should you go into default.
We would be glad to meet with you to discuss the differences between these processes further during a free consultation. In the meantime, please keep reading if you are wondering if you should take out a second mortgage.
Is it Right for Me?
Taking out a second mortgage is not your only option for dealing with your debts or funding a considerable expense in your life. You should seriously consider this decision and consult with an expert before you pull the trigger.
You may want to consider alternative options if you have a good credit score or substantial equity. Instead of pursuing a second mortgage, you may consider cash-out refinancing, which could help you avoid higher interest rates and monthly payments.
Free Consultation with Our Florida Foreclosure Defense Lawyers
Do you have further questions about second mortgages? Our Florida foreclosure defense lawyers can guide you through your options and advise you on what is suitable for you. Please call us as soon as possible to schedule your free consultation. We want you to be fully informed before deciding on your mortgage.