2nd Mortgages - A Benefit of Homeownership

If you own a home you can use it as collateral for a 2nd mortgage loan. Second mortgages may provide cash for any items you may need such as paying high interest debt, home improvements, college tuition or vacations. The interest rates on 2nd mortgages are typically much lower than credit cards, debt consolidation loans or personal loans.

Second mortgages are secured by your home. The amount that you qualify for will be based on the equity that you have in the home. The amount of equity that you have in the home is determined by subtracting your current mortgage amounts from the value of the property. Depending on your credit you may be allowed to borrow up to 125% of the value of the home. Obtaining a second mortgage for more than the amount of equity you have will lead to you having negative equity, or being "upside down" on the loan. Basically, this means that you will owe more than the perperty is worth.

Usually 2nd mortgages carry a higher interest rate than first mortgages. If you need cash and have significant equity in the home you may be better off with mortgage refinancing than with 2nd mortgages.