A fixed rate 2nd mortgage is a
popular way to
access the equity in your home, without having to refinance
your existing first mortgage.Your cash out can be used for
any purpose, and debt consolidation is
one of the most common uses.
It has been estimated that you could save up to 3 times more
money with a fixed 2nd mortgage term, compared to paying only the minimum
monthly payments for the same balance on revolving credit cards,
because of lower mortgage rates, simple interest, and a
possible tax deduction.
Looking for a high loan to value 2nd mortgage? Some credit unions and banks are offering 2nd mortgages and credit lines with no equity to qualified borrowers. See 100% home equity loans.
Revolving credit card
accounts typically charge daily compounded interest, which
means that essentially you pay interest on the interest
that accumulates on a daily basis. A 2nd mortgage can provide simple interest payments amortized on an annual basis,
which can reduce the amount of loan interest paid, because you are
not being charged for accumulating interest.
The interest on a 2nd mortgage loan
for your primary residence may be tax deductible up to the lesser of $100,000 loan amount,
or 100% of the value of your home. Consult a tax
professional.
After deducting the
closing costs, there is a one-time disbursement of the full
2nd mortgage amount. Certain debts may have to be paid directly in
order to meet the debt ratio requirement. Also, if there is an
existing 2nd mortgage on the property, it must be paid
with the new loan.
2nd mortgage interest
rates remain fixed for the full
term, which is usually available in 5 year increments ranging from
5 to 20 years, fully amortized and paid off at the end of
the term.
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