Second Mortgage What Is It Exactly

Everyone has heard a friend or relative complain about

having to take out a second mortgage but don’t really know

what that means. Let’s find out!

The real term for this is called a home equity loan. This

is a common loan type that homeowners can use for whatever

they want.

A home equity loan requires that you use your house for

collateral just like a normal home loan. There are

different types of home equity loan out there and you can

always use the money for whatever you want.

College, bills, and home repairs are some common uses. You

will need outstanding credit to be approved for this kind

of loan though.

A closed end type home equity loan gives you a big chunk of

money immediately and you can’t get another loan until this

one is fully paid.

The amount you can get depends on factors such as how much

your home is worth, your income, credit score, and similar

things. A closed end loan usually comes as a fixed rate

type and allows you up to 15 years to pay it off.

An open ended home equity loan is a little different. This

loan will let you borrow money whenever you have a need for

it.

The loan lender will set up a line of credit that is pretty

much based on all the same factors as the closed end loan.

These usually have an adjustable rate and you can make

payment for 10, 15, or even 30 years.

So why are these called second mortgages Because you are

adding yet another loan payment that uses your house as

collateral and adding another monthly payment. Though

tempting, it can cause you a lot of problems in the future.