Should You Get a Second Mortgage to Utilize Your Equity?

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Do you have equity in your home that you can use to get a second mortgage? In the past, second mortgages have been frowned upon because some homeowners had bad experiences. If you know someone who was burned by a second mortgage, then you are probably hesitant to get a second mortgage for your home.

The Housing Market Has Changed

Now, we are in a more stable housing environment; there are some great benefits to a second mortgage. The key is to make sure that you are using this financing strategy properly. For example, if you are thinking about remodeling your home and adding more square footage, then this type of loan can be a great solution to give you cash liquidity for the project. Another example is if you have high-interest debt, such as credit card balances, that could be paid with a second mortgage to reduce the interest accrual.

One of the benefits of a second mortgage is that the interest is tax-deductible, while credit card interest is not. Before making a big financial decision, it is best to consult your tax professional for advice.

Things to Watch for with a Second Mortgage

If you are thinking about using a second mortgage, then there are a few things that you need to be aware of to keep your family protected. Don’t over-extend yourself. You need to know the new payments that you will be taking on, to be sure that you will be able to meet your monthly financial obligations.

Most home equity lines of credit are adjustable, which means that when interest rates rise then your payment will go up. Talk to your mortgage professional for clarity on what you can expect to pay off the loan.

Also, be mindful of a potential job loss. Regardless of the type of debt that you are taking on, you need to make sure that your family could survive if income levels changed. If the answer is that you will be able to continue making the payments, then you might consider the option to use a home equity line of credit.

Do have any questions about buying a home or pulling equity from your current home in Temecula? Call, text, or email me anytime! I’m here to answer your questions and help with anything that you need: (951) 473-0390 or [email protected]