Debt Consolidation Second Mortgage Loan Advantages and Disadvantages
Posted at 1:03 am | Filed Under mortgage-financing-tips.info
You may never be as popular as today’s second mortgage, but it could be your best friend. In today’s finance-friendly world, it seems like everyone is getting a second mortgage or home equity line of credit — and as interest rates climb, their popularity grows. Even so, you still need to ask yourself: what are the advantages and disadvantages? Time to do some homework - the kind of homework that could save you thousands of dollars.
“It’s not about loans; it’s about changing people’s lives for the better,” says Rory Cambra, president of the North San Diego County Chapter of the California Association of Mortgage Bankers and a mortgage banker with Pacific Capital Mortgage.
What is a second mortgage? Quite simply, it’s another mortgage on your home, and like the first, it’s secured against your property or the equity you’ve built up over the years. They can be fixed-rate or adjustable-rate.
So, what’s the difference between a second mortgage and a home equity line of credit?
“A second mortgage is a lump sum. A home equity line of credit is basically an open checkbook,” Cambra says. Lump sum loans are best when you need all the money at once.. A line of credit is best when your cash needs are stretched out over time, like a series of home improvements or college tuition payments.
Equity is the difference between your home’s value and the balance on your mortgage loan. If your home is worth $500,000 and you owe $400,000 on the mortgage, then you have $100,000 of equity.
“Americans have hundreds of billions of dollars in equity, but most don’t understand that the equity in their home is not safe, liquid or growing,” Cambra says. “Everything from market conditions to disasters can significantly affect your home equity. It could literally just go away.” Before you decide to jump in to the second mortgage waters, assess your family’s financial needs and goals; explore the variety of second mortgage products, and understand how each type best serves your financial picture. Then consider the following:
Second Mortgage Advantages (They increase the more homework you do)
Make your equity work for you. It’s a good thing to separate your equity from your mortgage and put it in a safe, liquid and growing environment. “You’re not doing it to conserve your equity; you’re doing it to create wealth. It can even be used to create your retirement nest egg,” Cambra says.
A cash cushion. Cambra tells his customers that the best first use for your second mortgage is creating a cash cushion, suggesting a minimum of $5,000 be put away for emergencies. Why? So you won’t turn to credit cards the next time an unforeseen financial need pops up.
Pay off debt.
A non-brainer: pay off all your high-interest debts, including credit cards.
Serious liquidity. You can create serious liquidity, like socking away one year’s salary in the bank. (We can dream, can’t we?) Pay for your child’s education. That sigh of relief you just uttered is reason enough.
Create wealth.
Consider this: If you use the proceeds from your second mortgage properly, you can - on paper — pay off your house in full. The key words being, “on paper.” Obviously, you don’t want to miss all the financial and tax benefits that go with your mortgage, but according to Cambra, creating wealth on a balance sheet that is equal to the amount you owe is an accountant’s dream.
2nd Mortgage Disadvantages (They decrease as you do more homework)
Dealing with fear and stress. Everyone has trepidations when it comes to property finances. Fear causes some homeowners back away from a second mortgage. But if you educate yourself, and are prudent with the proceeds, you really haven’t increased your risk.
Not protecting your home.
Be realistic about estimating your future income. If for some reason you cannot pay back the second loan, it could be disastrous. Consuming the proceeds of a second mortgage unwisely. Some homeowners use a second mortgage to take a lavish trip, buy that fantastic new car they’ve always wanted or spend it on frivolities. Then they end up going right back to their credit cards. “It’s a fact: we are human, and we are driven by the pleasures of the world - and those are usually depreciating assets,” Cambra says.
Second Mortgage Costs, Fees & Charges.
2nd mortgages have more defaults, so it’s common for lenders to charge more fees up front. Prepare for and budget the costs. You might also have appraisal fees, points, applications costs and other closing costs. Ask your lender - beforehand - for a printed list of fees.
David is a free-lance writer and media consultant based in Southern California. He also serves as spokesperson for high-profile businesses, political campaigns and community issues.
Please visit these helpful resource websites: To get a no cost rate quote for a 2nd mortgage please check out Second Mortgage Quotes. If you need more loan advice about refinancing with Bad Credit, take a look at Equity Loan Refinancing. For the latest debt consolidation solutions, please visit the Debt Consolidation Loan Center.
Tags: 2nd mortgage, debt consolidation loans, equity line of credit, home equity loans, rates, second mortgagesSecond Mortgage Loans Are Cool for Debt Consolidation and Cash Out
Posted at 3:09 am | Filed Under mortgage-financing-tips.info
With the refinance boom officially over, second mortgage loans are cooler than ever. Many homeowners have been blessed with low interest rate first mortgage loans that they want to keep. The need for cash did not disappear with the refinance boom, so 2nd mortgages and home equity loans will be the loans of choice for the next few years. Anyone who has a 30-year fixed rate loan at under 6% should keep their existing loan in tact and take out a second loan on their home if they need cash. The Federal Reserve has hinted that there are more rate hikes coming, so if you are a mortgage broker or lender, it is time to brush up on your second mortgage product line, because people still need to access cash, and there is no better way to accomplish this.
Home Equity Loans to 125%
You don’t need any equity, and this loan program will actually allow you to exceed the value in your home up to 125%! These 2nd mortgages are typically offered with a fixed interest rate for 15, 20 or 25 year repayment terms. If you have credit card debt, or high rate loans, this is an excellent loan for eliminating compounding interest and saving money! IHE executive, Sandy Sarconi stated, “There is no better way for a hard-working family with no equity in their home to lower bill payments and get out of debt.”
* Fixed Interest Rate 2nd Mortgage
* No Mortgage Insurance Ever
* No Equity Second Mortgage
Stated Income Second Mortgages
More and more people are seeking reduced documentation loans. More and more people have become self-employed, and many people simply like the streamlined process.
* Stated Income Equity Loans
* No Income No Asset 2nd Mortgages
* No Income Verified Home Equity
* No Doc Equity Refinance
Second Mortgage Credit Lines
Sure the interest rates are variable. Yes the Fed has increased the prime rate index eight times in the last few years, but people love low payments that interest only loans provide. People also love the flexibility of only having to pay interest on the money you access. Where else can you get money waiting for you without having to make payments until you use spend cash!
* Interest Only Payments
* Home Lines of Credit
In 2006, the often bashful, second mortgage has emerged from the shadow of first mortgage, and evolved into the cool loan of choice.
Lynda Nelms writes a popular column, called “Ask Lynda” in which she offers useful home refinancing tips to consumers from an experienced loan officer’s perspective. Currently, Lynda originates loans for BD Nationwide Mortgage, who is located in San Diego, California.
To get learn more about no equity loan options, please check out 125 Second Mortgage programs.
If you need more useful tips for the Home Equity Loan process, please visit the BD Nationwide Mortgage online.
Tags: 125 home equity loan, equity line of credit, fixed rate, low rate loan, second mortgage, second mortgages