How to Be Smart with a Second Mortgage

Do you need extra money, but have nothing in the back to draw on? In this case, you may want to consider a second mortgage. Before you do this you need to know the pros and cons of a second mortgage, how it will affect you now and in the future, and what you can do to ensure a successful transaction.

Generally speaking, a second mortgage is nothing more than another mortgage on your home. It acts as another loan secured against your property.

Why would anybody want to risk their home by taking out a second mortgage? There are many reasons why second mortgages have become so popular. For one, when you borrow against your home you can get a bigger loan.

There are many reasons for taking out a second mortgage with some of the most common being: to avoid private mortgage insurance, make home repairs, purchase another property (vacation home), and to create a home equity line of credit.

A second mortgage is not something you should jump into without thinking about the future ramifications. While there are many benefits to getting a second mortgage, you need to be smart about the decision you make.

The biggest potential drawback of a second mortgage is that you are risking your home if you get in a bind and are unable to pay back the loan. Additionally, you can expect to pay a higher interest rate on your second mortgage as compared to the original loan.

Options for Homeowners Facing Bank Foreclosures


Before taking out a second mortgage consider the pros and cons, as well as your financial situation. Will you be able to comfortably pay both mortgages, month after month?

If you have equity in your home a second mortgage is a consideration. Before you move forward make sure you are totally aware of the pros and cons of second mortgages, and how your finances will be affected.