When it’s Wise to Buy a second Home Mortgage? This is what most people question. Know how you can get benefited by buying a second home mortgage

Pittsfield, MA -- (SBWire) -- 08/05/2013 --How much do people know about buying a second home mortgage? Real-Estate-yogi.com knows a great deal about it and would like to share its knowledge, such as:

- Defining a Second Mortgage
- Types of 2nd Mortgages
- Advantages of 2nd Mortgages
- Disadvantages

Explaining a Second Mortgage

Buying a second home mortgage can be a little confusing. To clear up any misunderstandings, here are some things a consumer ought to know about this financial product. One may hear a second mortgage referred to as a home equity loan or line of credit. This second loan is also backed by the equity in one’s home, so if one doesn’t pay it, the lender can take his house. Right now, interest rates are low and values of homes are rising, making a second mortgage appealing.

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Second Mortgage Types

As mentioned, there are two main types of second mortgages, a home equity loan and a home equity line of credit (HELOC). Research both of these options before buying a second home loan. A home equity loan is given to a borrower in one lump sum which he then has to pay interest on. Generally, interest rates for these loans are fixed. A HELOC works like a huge credit card, allowing a homeowner to spend the money as he requires it. HELOCs usually have adjustable interest rates.

Pluses to 2nd Mortgages

Buying a second home mortgage rules indicate that there are none limiting what can be done with the large amount of money these loans give a homeowner. Many people use it to remodel a room in the house or to add a new garage to the property, both of which increase the value of it. Typically the interest rates on these loans are very low, though maybe not quite as low as on the original loan. In many cases, the interest paid is tax deductible; check this with a tax advisor.

Minuses of Second Mortgages

The biggest negative to buying a second home mortgage is that it, too, relies on one’s home as collateral, which can put a homeowner in a precarious position. If a financial setback occurs and he cannot afford the payments on both mortgages, he could lose his house. He may have to pay high costs to get the second mortgage, such as closing costs of 3%-5% of the total loan amount. Too, if one’s credit has been damaged and his score isn’t great, he’ll have to pay a higher interest rate.

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