2nd-Mortgage

A home equity loan and second mortgage, is a good option if you’ve got climbing debt and some equity built up in your home. Taking out a home equity loan or a home equity line of credit may be a viable solution for you, but only if you find the right second mortgage interest rate.

You can use the funds from your line or credit and second mortgage in order to pay off debt, do home renovations or consolidate your bills. However, if you’re using it to pay off debt and you don’t do anything to adjust the way that you have been spending money then you’ll end up overspent again in just a few years. Don’t think of a second mortgage as a band-aid to a bad spending habit. Take out the second mortgage but also start using a family budget and control frivolous spending.

Second mortgages come with better interest rates than other types of loans. You can select either a fixed rate or an adjustable rate of interest. If you select a fixed-rate second mortgage and you stay in your home for several years, you’ll save money over an adjustable-rate loan if interest rates go up, which they usually do.

Whichever of these methods of utilizing your equity you choose, lenders are very unlikely to release the full value of the equity. They will always wish to retain some equity in the property in case of a fall in value or other emergency. However, if you are looking for a second mortgage, it is possible in some cases to find a lender who will go up to 100 per cent – at much higher rates, to reflect the higher risk.

Whether a remortgage and second mortgage is better for you will depend on your individual circumstances. A broker or financial adviser will help you decide what’s best for you.