5 Legitimate Reasons to Take Out a Second Mortgage
The idea of taking out a second mortgage may seem daunting, but there are legitimate reasons to consider a second mortgage or a home equity loan. As long your financial advisor agrees that you’re in a good position to support an additional mortgage, consider taking one out to increase your home’s value or to offer yourself more financial security. There are at least five legitimate reasons to look into home equity.
Remodeling
A remodel doesn’t have to be a complete gutting of a room. Even installing a gorgeous bathroom vanity can give your bathroom a whole new look, for example. Your second mortgage only has to be enough to cover your planned remodel. Whether you spend a few thousand or tens of thousands to update your home, think of the expense as not only an investment in increasing its value, but an investment in your comfort. You own your home, so don’t be afraid to take out a loan to tailor that home to your needs and desires.
Selling the House
If you’re selling the house, you’ll probably have to not only remodel outdated and worn-down areas, but you’ll need to fix a few creaky floors and leaky faucets that could stand between you and making a sale. If you properly fix up the home, you can start at a higher-selling price and recoup your investment, meaning you can pay off your entire second mortgage once you sell.
Emergency Home Repairs
Most people do their best to have a cushion of savings for minor emergencies, but few people can set aside thousands of dollars for the kinds of emergencies that come up around the home. According to USA Today, the average amount homeowners spend on home repairs annually is $4,000. It’s not cheap to fix the kinds of major problems that pop up around the house — and you won’t have time to wait until you can save money to afford them, either. Repairs like burst water pipes, broken air conditioners and furnaces, and holes in your roof after a storm need to be fixed fast, so have the line of equity available.
Debt Consolidation
If you have a lot of debt, you probably can’t imagine why you’d want to take out a new loan, but it’s because you have a lot of debt that you should. Consolidation may be in your best interest if you have school loans, a car loan, medical expenses, credit card bills and other large bills you pay each month. One monthly payment is much less of a headache than multiple bills and due dates. Using your home as equity, the second mortgage will allow you to increase the repayment period so you pay less each month — and you get creditors off your back.
Medical Bills
Like emergency home repairs, emergency medical bills tend to be in the thousands-of-dollars range, so it’s hard to have enough savings set aside to pay them off all at once. At the same time, you don’t want to delay what could prove to be essential medical treatment just because you don’t have the money to cover your out-of-pocket expenses. Surmounting medical bills are a legitimate reason to take out a second mortgage because they’re an expensive necessity.
If you qualify for a second mortgage, this means that a lender believes you are in a financially comfortable enough position to pay it off at a reasonable rate. If you’ve discussed your finances with an advisor and they recommend the home equity line of credit, apply for one promptly. When they aren’t used for frivolous purchases, second mortgages can be vital to a borrower’s financial security.
About the Author: Clementine Moya is a financial advisor and former real estate agent. She regularly dispenses financial advice in her local newspaper.
Category: Mortgage
