A second mortgage grants homeowners the ability to borrow equity from their home to gain financing. These funds can be used to pay bills, enhance the property and more.
The second mortgage is connected to the equity your current mortgage has built up, so it’s crucial to understand the ins and outs of a second mortgage before deciding to use it.
Advantages & disadvantages of a second mortgage
Advantages
- Lower interest rates in comparison to standard lines of credit.
- More financial wiggle room to invest in larger home renovations.
- You can use your homes’ equity without having to refinance the original mortgage.
Disadvantages
- Your mortgage lender may require a high credit score and debt-to-income ratio to qualify.
- Your home may be at risk if the home equity line isn’t paid back within contract guidelines.
- If you decide to sell your home, you may make less profit.
How do I get a second mortgage & what should I expect?
To take out a second mortgage loan, most lenders require a decent amount of equity to be built up on your home which is the amount you’ve paid towards the principal balance (the cost of the home plus interest).
After taking out the second line, you’ll need to have at least 20 percent equity still built up on your home. If you need this money fast, please note, it takes a few weeks for lender approval and the loan comes with fees.
If you’re unsure a second mortgage is for you, speak with your lender to explore your options and make adjustments as needed.
About the Author
Diana Hellman
Diana Hellman's passion for Larchmont inspires her more than 20 year real estate practice. As a certified buyer's representative, "The development of a solid and trusting relationship with my buyers and sellers is what I strive for." This success, primarily built on client referrals and repeat business, comes from her knowledge of what makes Larchmont unique: it's school system, recreational facilities, services and the special qualities that pervade this village's atmosphere. A former educator with a background in psychology, Diana knows that people don't want a sales pitch, but rather reliable, timely information. She and her husband have been residents of Larchmont for over 40 years. Her 3 children have attended the Mamaroneck Public Schools. She can give you expert advice with the sale or purchase of your home. Awards/Distinctions Multi-million dollar club- Westchester Board of Realtors International Diamond Society (8 million plus in sales), 5-Star agent in 2024. Gold Award- WBR (5-8 million dollars in sales) Silver Award – WBR (3-5 million dollars in sales) Memberships National Association of Realtors New York State Association of Realtors Westchester Board of Realtors Westchester Multiple Listing Service Community Former executive board member of the Central School Former selection school delegate for election of school board candidates Former executive board member of the Friends of the Emelin Theatre Former executive board member of the League of Women Voters