What is a Second Mortgage Loan and How Can it Help You?

As a homeowner with a mortgage, the purse strings can seem pretty tight at times. Not only are there the various home-related bills—such as the monthly mortgage payments, utility bills, maintenance and repairs—but there are also the many other financial obligations such as car payments, insurance, medical bills and the like. So how is it possible to afford all of these costs and still plan for future commitments like paying for your child’s education or reducing the never-ending debt spiral? It’s called a second mortgage and it could be the key to the financial flexibility you’ve been looking for.

What is a second mortgage?

A second mortgage represents a great opportunity for you, as a homeowner, to leverage the equity in your home to do some things you’d otherwise be unable to do. In general, there are two types of second mortgages for which you can apply:

1. A home equity loan is similar to a typical mortgage in that it involves a fixed or adjustable interest rate in various increments (10, 15, 20 or 30 years)
2. A home equity line of credit (HELOC) is like a revolving credit account that is based on the equity in your home. This type of second mortgage loan involves a variable interest rate and typically comes with no set term.

What can a second mortgage do for you?

Second home mortgages don’t come with restrictions on how the money should be spent, but there are some uses that are better than others. Some of the more common uses include:

• Finance a child’s education
• Pay off debt (credit card, student loans, car loans etc.)
• Renovate home/improve property
• Make large purchases (vehicle, appliances, furniture etc.)
• Make investments

There are a few things to be weary of however.

What to know about second mortgages

Borrowing more money against your home can be risky. If you’re unable to repay your second mortgage loan, you still run the risk of losing your home to foreclosure, so make sure you can afford to pay back the extra money borrowed against your equity. There are also a few other stipulations related to a second mortgage you should be aware of:

• Fees and closing costs—Just like your first mortgage, you will be required to pay fees and closing costs.
• Higher interest rates—The interest rate for your second mortgage will likely be higher than your first mortgage, because the first mortgage takes precedence in terms of repayment.

If you find you’re in need for some additional funding to handle some of life’s other obligations and the benefits outweigh the risks listed above, a second mortgage may be the right move for you.

With over 150 years of collective mortgage experience, the team at Blue Water Mortgage has the knowledge and know-how to get you the funding you need for your next home or your next big purchase. In addition to nearly a century of combined experience, loan officers at Blue Water Mortgage are also able to leverage their relationships with other large lenders to ensure you have little to no problem getting approved for a second mortgage. Contact us today!

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.