When does it make sense to get a second mortgage?
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Oct 01, 2016  |  Vote 0    0

When does it make sense to get a second mortgage?

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Sooner or later we all need access to some extra cash, and Dan Brown from Mortgage Financial Corporation in Brantford can help you decide whether getting a second mortgage on your home is a practical solution.

Many homeowners turn to a second mortgage when facing financial problems and look to use the equity in their homes to prevent bankruptcy and pay off debt, particularly high-interest debt like credit cards. This can make sense under certain circumstances, but not if the cost of a second mortgage will be too much of a hardship or the habits leading to that debt remain unchanged.

Although debt consolidation may be a good reason to apply for a second mortgage, funding an education and home improvements are also large expenses where a second mortgage may be more advantageous than taking out a personal loan at higher interest rates with hefty payments.

Second mortgages are beneficial for tapping into unused equity in your home. With your home as collateral, you can qualify for larger amounts. Most lenders will allow up to 80 per cent on the equity of your home with a first and second mortgage combined. Lower interest and tax deductions on the interest of a second mortgage make it a preferred solution in many cases.

There are some drawbacks to a second mortgage. Like a first mortgage, your home will have to be appraised, and there are the fees associated with getting a mortgage. Usually the interest rate on a second mortgage will be higher than the first, and if you are unable to make the payments your home is on the line, so it is important to consult with a professional to see if this option is best for you.

It is important to weigh out the pros and cons of a second mortgage. If paying off your mortgage and keeping that nest egg untouched is the main goal, you may want to consider other options. In many cases, though, quality of life is just as important and a second mortgage may offer the best solution.

For more information about second mortgages, call the experts from Mortgage Financial Corporation in Brantford at 519-751-3440.

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