A second mortgage means taking up a new bigger loan with your new house even before you finish paying off the first loan. The first loan is the loan you took to purchase the house in the first place. Although it may seem like a really bad idea, it actually has its many advantages that you would find more reassuring and beneficial to undertake. The above decision of using a second mortgage is a very serious one that you should highly research before you start. Below are some of the advantages of a second mortgage:
- Allows large sums of money. Having a second mortgage will mean that you can borrow up to 80% of your house value and since the value of the houses rises daily, so is your loan limit. A second loan can easily help you start your own company or a big investment plan. It can help boost you on your stuck projects that needed large sums of financial aid.
- Has low-interest rate. Unlike other loans, a second mortgage interest rate is always one digit. The interest rate is highly regulated and kept to the minimal. This is because banks and lenders consider it a safer loan that has actual collateral damage that will be to their benefit in case of a default in the contract. The interest rates are low to attract many borrowers and you should ensure that you get the best deal before you commit. Altrua Mortgages offer the best lowest interest rates in the market with the best payment plan.
- The interest is taxed. The advantage of taxing the interest in a second mortgage means that the interest is still being reduced. This is not the case with other loans. For example, in the first loan, the interest worked out by you and the lender should be paid strictly, the full amount and according to the agreed terms of payment. With a second mortgage, the worked out interest is taxed and the sum remaining becomes the new interest. Tax is deducted from your interest.
- Can act as a financial emergency back-up. A second mortgage is easy and fast to process. This means that it will take less of your time and the percentage of getting the loan are very high. This will help you achieve cash fast enough to sort out the most urgent issues. It can also be used from time to time if you keep a good line of credit and equity.
- Helps one avoid private mortgage insurance. If you want to venture into the business of real estate, then you probably don’t want to be stuck with monthly deposits to your private mortgage insurance. This can be avoided by always taking up a second mortgage that is high enough to pay off the first loan and within 80% of the house value.
Despite the many advantages of the second mortgage, there are also few risks and disadvantages that you should highly consider. For example, default in your payment can lead to foreclosure that may lead to you losing your house.