The article concerns the question – Why or Why Not get a Second Mortgage? These days most people are looking for a source of cash in order to pay their bills or to buy things they need or want. There are a lot of options out there for raising cash and one popular choice is to take out a second mortgage. The question is whether or not this is a good idea. The fact is that there are times when it does make sense to take a second mortgage and there are times when it is really not a good idea. The key is to be able to recognize the difference and know when it does and when it doesn’t make sense.
A second mortgage is simply another mortgage that you would take out on your home in addition to the original one that you used to purchase the home. It is called a second mortgage because the initial mortgage has priority when it comes to getting paid. That means that if you default on your mortgages and your home were to be repossessed any money from the sale of your home would go to pay off the original mortgage before it went towards the second mortgage.
This means there is more risk for the lender when it comes to second mortgages and as a result the interest rate is going to be higher. There are times when it does make sense to take out a second mortgage. Even though the interest rates on a second mortgage are higher than they are on a first mortgage they are still lower than the rates on most other types of loans.
That means a second mortgage can be a good way to pay of high interest debt like credit cards. If you enter into a debt consolidation program you will also likely find that you need to take out a second mortgage. Other good reasons to take out a second mortgage would include to make home improvements or to buy an investment property.
The problem with a second mortgage is that it means putting your home at risk; this is not something that should be entered into lightly. A lot of people will choose to take out a second mortgage because they view it as a source of cash that they can use when they want to buy something. The reality is that unless the money is being used for something constructive like an investment or to pay off your other debts it is rarely a good idea to take out a second mortgage.
It is very easy to find yourself in a situation where you are having trouble paying your bills. If you have two mortgages this problem becomes even more serious since you will lose your home if you can’t pay either mortgage. This significantly increases the risk of having your home repossessed so you should have a really good reason before you make such a decision.