Pros & Cons of Second Mortgages

Pros & Cons of Second Mortgages

Pros & Cons of Second Mortgages

The term second mortgage may make the hairs on the back of your neck stand up, but if you know how to use it, a second mortgage can actually help you out. 

When you hear the term “second mortgage,” negative thoughts come into play. You may ask yourself, “Why would I ever need a second mortgage if I’m not in financial distress?” You may be surprised to know that times have changed, and the days when homeowners would put a large down payment have come and gone. Nowadays, it’s rather common for homeowners to take out a double mortgage for their home. Here are some things you should know about second mortgages.

Second Mortgage Pros

Second mortgages allow homeowners to put up a smaller down payment or no down payment at all. Homeowners can break up the total loan amount into two separate loans (hence the name) and the risk is split between the two loans. This allows a higher combined loan-to-values and lower blended interest rates.

Second mortgages can also be opened after the purchase transaction has been complete.

Second Mortgage Cons

Interest rates on second mortgages are typically higher than one mortgage. It’s also quite common to receive an interest rate that goes into the double-digits on a second mortgage.

Second mortgages ultimately mean more debt, more interest, and more time to pay off your first mortgage. This works well for the short term, not so much for the long term.

Homeownership is a very important step in anyone’s life, but you should not dive in head-first without doing research–it may save you thousands of dollars. For all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California, contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. We have the experience needed to make sure you get the right mortgage.