So why would somebody risk their home with a second mortgage? These types of loans are appropriate for times when you need a lot of money. And it's not like most have us just have money lying around.
Assuming you've paid off part of your home loan or your home's price has risen, second mortgages allow for bigger loans because the lender considers a loan against the home to be safer as the home serves as collateral.
Disadvantages of Second Mortgages
The main disadvantage with a second mortgage is that you are risking your home. This is a serious risk because if you can’t pay the loan back, your lender can potentially take over force you out of your property. Make sure that your intended use of funds is worth the risk you’re taking by using a second mortgage.
Another drawback is that second mortgages have slightly higher rates than senior mortgage rates. This is because the second mortgage won’t be paid until the first one is therefore because the loan is riskier, it costs more. However, the rate might still be lower than alternative sources like credit cards and unsecured personal loans.
Also, you may have to pay hefty second mortgage fees. There are a lot of hoops to jump through and services to pay for. Depending on how much you need and how long you’ll need it, a second mortgage may not work simply because of the fees.
Where Can You Get a Second Mortgage?
You can get a second mortgage from almost any lender and they love them! A good start is to ask at the institution you’re already working with. Or, you can try to get your second mortgage from the lender that has your primary mortgage. By keeping your business in one place, you could save on fees. Mortgage brokers and online lenders may also be a resource. Be sure to get quotes from several different sources (your bank, an online lender, and a mortgage broker) and compare offers before you borrow.
