The pros and cons of second mortgages

May
30

So many of my clients go to sell their Broward County homes but run into a problem with their second mortgage or equity line and don't get as much money as they hope. Second mortgages and equity lines can be a good thing if you work them right, but you need to be careful with your equity. Let's look at how second mortgages and equity lines work and the best way to make second mortgages and equity lines work for you. There are a ton of reasons why you would want to open a second mortgage or equity line of credit. Let's first look at the differences. A second mortgage is when you take out a loan on the equity of your home that you can access only once. An equity line is a revolving line of credit that you can access at any time. Some reasons why you would want to open an equity line or second mortgage are:

Paying off high interest credit cards or other loans. You can deduct the interest on your taxes most of the time.
Working on your home with renovations that cost more than you have on hand.
Paying off medical bills
Purchasing new cars or large ticket items

These are just some of the reasons why someone would want to take out part of the equity in their home. There are pros and cons to both second mortgages and equity lines. Let's look at the pro's first.

You have access to large amounts of money to use to have just one payment.
You can usually deduct the interest you pay on a second mortgage or home equity line on your taxes.
Your interest rate is usually lower than most other types of payments in your budget.

The con's of a second mortgage or equity line are just as important.

If you are using it to pay for living above your means, you will just be in the hole again soon while putting your home in jeopardy.
When you go to sell your home, you will get less money to walk away from the close with.
Watch the fees on these types of loans to make sure it isn't more expensive than what your bills are currently.

A second mortgage when used correctly is a good thing. You can accomplish a lot with them that you might not be able to accomplish on your own. Just be smart with the money. Don't put your home on the line if you can't pay for it. Remember, your home is your largest investment. Treat it that way and make it work for you. If you want to sell it, then come and let's talk about what kind of equity you have and we will see how to best serve you.

Talk to you later,

Christine

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