Pros And Cons Of 2nd Mortgages

Pros:

A second mortgage will be beneficial for those people who are stuck in a high interest debt such as credit card or personal loans. The rate of interest for a second mortgage is hovering around 5%-6%, therefore, for people with a 20% debt on a credit card, taking a second mortgage can work well. By tapping the equity in your home, you can also pay for some of your imminent needs without taking a higher interest rate loan.

Cons:

One of the biggest disadvantages of a second mortgage is that it means that you have to start from scratch in building equity in your home. It increases your debt-to-asset ratio and it will take you longer to become the owner of your home.

Lenders use the value of the property as collateral while offering you a refinancing mortgage. While it may help you in getting low rate of interest, you run the risk of losing your home in case you face a financial catastrophe.

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