Homeowners today should regard their house as more than a place to live – it's also a viable financial investment. Making the most of that investment is possible through numerous steps, one of which is the second mortgage.
While the prospect of taking out a 2nd mortgage loan and adding a new debt to your financial life isn't always appealing, the reality is that a second mortgage could be one of the smartest moves you make for your finances and your life in general.
Here are 15 reasons why it's something that you should certainly consider for yourself.
Cash Out Opportunities – The 2nd lien is an alternative to the cash out refinance which involves revising the original mortgage while receiving additional money. Today's second mortgages offer you the chance to get big cash out amounts based on the equity in your home versus the debt you currently have in place. As a result, you can end up with funds that you are able to use for a wide range of different things. We'll talk about some of these below as well, but just know that the ability to get cash as you need it is a big part of what makes 2nd mortgages so important.
Debt Consolidation –Using that cash from your loan to consolidate other debt into one single payment is often the main reason for taking out a 2nd mortgage. Instead of multiple credit card payments with high interest, you have a single monthly payment with lower rates.
Home Remodeling Projects – You can use your cash from the loan to complete home repairs, remodels, and additions. These give you a huge amount of benefits including enjoying your home more and increasing home value.
Get Rid of Student Loan Debt – Many homeowners choose to pay off student loan debt with their cash, eliminated this stressful debt completely.
Financial Stability – Just knowing that additional funds are available to you can provide a financial cushion that brings tremendous peace of mind with it.
Low Interest Rates – The interest rates on second mortgages are very low, and that makes this a more attractive option than other loan types that are available today. Compare 2nd mortgage rates to HELOC rates.
Freedom with Your Funds – You have complete freedom to do what you want with your funds, instead of being limited by specific requirements put in place by the lender. It's your money to do what you want with.
Increased Equity In The Future – If you use your equity loan for things like remodeling and home improvement, it can lead to even more equity and overall home value in the future. This in turn means that you will be able to sell for a higher price or take out additional refinancing options in the future. Used wisely, a 2nd mortgage can be a smart investment in your future.
Improved Credit Score – A second mortgage can help you reduce existing debt, pay off other loans, and generally start improving your credit score in bigger ways. As long as you stay current, you'll improve your credit significantly. Compare home equity loans and credit.
Pay Off Medical Debt – 42 percent of people say that their credit is impacted negatively by medical debt. A second mortgage lets you pay off that debt quickly and improve your financial situation in the process.
Vacation Funds – While it's admittedly not exactly a wise financial move, there are very few restrictions on what you can do with the funds as we mentioned earlier. As such, you can use a portion of them to take a vacation and recharge yourself mentally and physically.
New Loan Options – Today's second mortgage options offer you the chance to take a loan in various ways. One of the best is to secure a line of credit based on your equity. This loan works essentially like a credit card – you have an amount of funds that are available to you, and you use them when you need to. You'll only pay interest on the amount you use, not on the total sum. This keeps your monthly payments lower and gives you more control over how you manage your finances.
More Options for Homeowners – The simple fact is that when you are a homeowner seeking a 2nd mortgage, you have far more options in terms of lenders. More second mortgage lenders are willing to work with you, giving you more power over your loan.
Better Current Credit Situation – In many cases, those who are seeking a second mortgage are in a much better place financially than when they applied for their initial mortgage. If you've stayed current on that mortgage, you likely have a better credit score and better overall credit worthiness. As a result, you'll be able to get better loan terms and rates than before.