A second mortgage refers to a second loan placed upon a piece of property, typically by the home owner. One of the main driving forces that prompt people to take out a second mortgage on their home is debt consolidation. Credit cards are extremely prevalent in today’s society, so it’s not exactly uncommon to have 5-8 at your disposal. However, credit cards also have a tendency to get you into a lot of financial trouble as you begin to use the infamous phrase, “charge it to the card” more and more on your purchases.

Second Mortgage Processes and Facts

The process for getting a second mortgage is much like the one you go through for your first mortgage. The completion of financial paperwork, personal information, a home appraisal, and providing your new mortgage lender with necessary information in regards to your mortgage loan must all be taken care of. There are also fees to be paid as you are essentially obtaining a new loan. These include loan origination fees, appraisal fees, and closing cost related fees. You must also bear in mind that once you get a second mortgage, you will be making two payments on your home every month and not just one. In addition to your fist mortgage payment, you will also be making a second mortgage payment every month in an effort to stay on top of your mortgages and avoid defaulting.

Benefits of Second Mortgages

There are certain advantages associated with taking out a second mortgage on your home that you may not have thought about:

• Your second mortgage is lower than your first mortgage, which means if current interest rates are high, a second mortgage may be better.
• Second mortgages may wind up costing you less money in the long-run if you are able to find lenders that offer good loan terms.
• Second mortgages could be more cost-effective for you in comparison to refinancing, which involve fees that are based on the amount you borrow.

Reverse mortgages, on the other hand, essentially cater to seniors ages 62+ by providing unique types of loans that allow them to convert the equity in their home into immediate cash for other financial needs. They are able to achieve this without having to sell their home, abdicate title, or take on a new monthly mortgage payment.

Things You Need to Know About Reverse Mortgages

There are no special income or medical requirements that may qualify you for a reverse mortgage. If you are the age of at least 62, own a home, and have sufficient equity in your own home, you are eligible for a reverse mortgage. You have options to receive the money from a reverse mortgage as a lump sump, fixed monthly payments, as a line of credit, or as a combination of any one of these. The amount of money you may be eligible to receive is contingent upon factors such as your age, appraised home value, current interest rates, and the lending limit in your area. There are also no restrictions on how you can spend the income from a reverse mortgage. You may wish to use it as part of your retirement fund, to cover day-to-day expenses, pay off your debts and pay for healthcare, or perhaps take a much-needed and deserved vacation!