Once you are the owner of your own house, some new goals arise and the need to fulfill them is an urge to be satisfied.

And when the will is on, the awareness of lacking the funds to complete those goals would strike hard at the moment.

One viable solution is to get a second SunWest Mortgage. They are called this way, due to the fact that the first mortgage was the one obtained to buy the house and the second one is using the house as collateral. These sorts of loans lie into the equity in your home category, reflecting the market value of your home to any loan balances. Equity can increase or decrease, but ideally, it only grows over time. Equity can vary depending on several factors, such as:

  • Making monthly payments of your loan, reducing your loan balance increases your equity.
  • A strong real estate market or improvements made to your home also make equity grows
  • Equity can be lost when your home loses value or you borrow against your home.
Second mortgages can be presented in different forms. They are:
  • Lump sum: this is a one-time loan that provides a lump sum of money which can be used for whatever you want. This type of loan can be repaid gradually over time mostly with fixed monthly payments. Every payment made covers a portion of the interest as well as the loan costs.
  • Line of credit: this type of loan, money is not necessary involved, but the possibility is opened. The lender sends a maximum borrowing limit and you can keep taking it until you reach the maximum limit. Similar to credit cards, you can repay and borrow time after time.
  • Rate choices: Depending on the type of loan you take and your preferences, they can come with fixed interest rates that maintain the percentage unchangeable for the time of the loan. Also, loans can come with variable rate interest which changes every certain period of time.

Second mortgages have several advantages when they are taken. Principally, they allow you to borrow significant amounts of money. These loans are secured by your property; the access of money is higher than when your home is not being used as collateral. Some lenders can offer up to 80% of your home’s value, counting all of your home loans including first and second mortgages.

Additionally, they offer lower interest rates than other types of loans. Since your home is securing the mortgage, the risk taken by the lender is lower; and due to the same fact these sort of loans interest are frequently in the single figures.

In third place, loans of this sort, especially those previous 2018, a deduction for interest paid on second mortgages is offered. Although, several technicalities have to be taken into consideration, so it is advisable to ask your tax preparer before making tax deductions. Find information about this on the web to verify if these deductions apply to your second mortgage.

Besides the benefits you can get from these sorts of mortgages, there are certain disadvantages coming with these loans. All the benefits and risks including on these sort of debts, force the borrower to think wisely in their usage.

One of the biggest problems with a second mortgage is that you have to put your home on the line. If the payments are stopped for any reason, the lender will be able to take your property through foreclosure, causing several problems for you and your family. So the usage of this loan for entertainment or regular living expenses is not recommendable at all.

Another point of disadvantage of these second mortgages is their cost. They have proved to be very expensive. The need to pay for things like credit checks, appraisals, origination fees, and other requirements. Closing costs should be added and they can easily add up to thousands of dollars, even though you have been promised a “no closing cost” loan.

And included in the cost area, interest rates are also a factor of disadvantage, even though they are typically lower than credit card interest rate. But this interest rate is slightly higher than a first loan interest. Stopping payments would make the second mortgage lender to get no money until the primary lender gets all of their money back. Due to this, interests continue to be added to the second mortgage and the cost at large would be very significant.

But second mortgages are a useful tool for home improvement, the avoiding of paying Private Mortgage Insurance, consolidation of debt, and education.

But besides all the usages and benefits you can give and get from these sorts of loans, it is necessary to be well aware where you are getting into and think wisely before taking a step further in this area.

Information from the web or other sources, and a good advice from a specialist is highly recommended.

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