second mortgage 

Second Mortgage

What is a Second Mortgage?

It is nothing but a mortgage on real estate which has been pledged as collateral for an earlier mortgage. The placement of the simple interest loans (second mortgage) on property title does not change the terms of the existing first mortgage (earlier mortgage). The rights carried by second mortgage are secondary in importance to those of first mortgage.

Second mortgages are also known by some other names : home equity loan (traditional home equity loan),home improvement loan, home equity lone of credit or debt consolidation loan.


What are the options available for deciding on getting second mortgage?

1) Traditional second mortgage
2) Home equity loan
3) Home equity line of credit
(With some limits , interest is deductible in all of the three above cases).


Why do we need second mortgage?

Special benefits of second mortgage are:
1) Reduction in monthly payments of borrowers (if the rates drop after the purchase of the home).
2) Borrowers can tap the equity build into their homes and utilise the money for home improvements , college tuitions, etc.
3) By second mortgage , borrowers can pay off other debts and consolidate all their debt into one mortgage loan.
4) Second mortgage enables the borrowers to convert their adjustable rate mortgage into a fixed rate mortgage - giving predictable fixed payments until the loan is repaid.
5) Helps borrowers in eliminating mortgage insurance levied on their mortgage.

These benefits outweigh the drawbacks hence it is advisable for one to go for second mortgage.