A Second Mortgage Vs. A Home Equity Loan
by: Jay Moncliff
If you own your
home and need a loan for whatever reason you have probably considered a
second mortgage or a home equity loan to help you pay your bills, buy a
new car, or pay for some other investment. However, you probably
don’t know whether a second mortgage is better or worse than
a home equity loan for your particular situation. However,
don’t despair because there are some tips that will help you
decide whether a second mortgage or home equity loan is for you.
Second Mortgage
Tip #1 One Time Expenses
A second mortgage
is the preferred option if you have a one time big expense you need to
cover. Examples of this include remodeling your kitchen, paying for a
wedding, or buying a new car. In these instances a second mortgage will
probably work best for you; however this will depend on the equity in
your home and your credit score.
Second Mortgage
Tip #2 Recurring Expenses
If you are going
to have recurring expenses then you might not want a second mortgage
because a home equity loan will work out better for you. The second
mortgage is best for large amounts of money at once while recurring
expenses like tuition are better paid for with a home equity line of
credit.
Second Mortgage
Tip #3 Repayment
You will also need
to consider your ability to repay and which option will suit you best.
A second mortgage can be financed similarly to your first mortgage,
while the home equity loan can be paid back more like a credit card.
Consider your financial position and ability to make monthly payments
before applying for either a second mortgage or a home equity loan.
If you still
don’t know whether a second mortgage or home equity line of
credit is for you, then talk with your lender and see what is
recommended for your equity, credit, and ability to repay the loan.
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