What to Know about Second Mortgages on Your West Chester or Liberty Township Home
Congrats! You’re the proud owner of a West Chester or Liberty Township home. You’ve made it through a long, arduous process that included shopping around for mortgages. Now, you’re finally settled in. Feels great, doesn’t it?
Whether you’ve been in your West Chester or Liberty Township home for a year or for decades, there might be reasons for you to consider taking out a second mortgage against the property.
Here’s what you need to know about second mortgages:
There are several reasons to get a second mortgage.
Although this is not a complete list of reasons to take out a second mortgage, here are some of the more common scenarios:
If you purchased your West Chester or Liberty Township home for sale with less than 20% down, there’s a good chance you’re paying PMI (private mortgage insurance) each month. A second mortgage can eliminate PMI by covering the rest of the 20% down. This can save you hundreds of dollars each month.
Yes, you’ll have another loan to pay, but there are some second loan programs that allow you to pay interest only for a certain period of time (e.g. 10 years). Better yet, you can turn around and write off that interest on your taxes each year!
Covering big expenses.
Second mortgages are often used to cover big expenses like home improvements, college tuition, or a new boat or car. Some people even leverage the equity in their West Chester and Liberty Township homes to purchase another piece of property!
Paying down debt.
Buying a West Chester or Liberty Township home for sale usually requires a large upfront investment. In addition to your down payment, you probably had to put up a good chunk of change for the closing costs. Buying a home sometimes straps people financially, at least at first. You may have turned to credit cards to cover monthly expenses that you’d normally have paid off in full. Or maybe buying a home meant that you couldn’t put as much money toward your student loans each month. Second mortgages are often used to help pay down other loans or debt, particularly those with high interest rates.
There are generally two types of second mortgages.
Once you start looking into second mortgages, you’ll find that they all generally fall into one of two categories.
Home equity loans.
With a home equity loan, you’re borrowing a lump sump and will pay it off monthly over a set period of time. The interest rate on home equity loans is typically fixed.
Home equity lines of credit (HELOC).
A HELOC is different in that it grants you access to a set amount of money over a certain period of time. You can tap into that money whenever you need to, but aren’t obligated to do so at all.
For instance, if you’re thinking about taking a new job, you might decide to take out a HELOC first. (It’s usually much harder to obtain a second mortgage after you’ve switched jobs.) You’ll have that HELOC handy in case you need it down the road, for home improvements or otherwise.
The benefit of a HELOC is that you only need to pay back what you borrow. The downside, though, is that interest rates are typically adjustable and can go up over time.
A second mortgage isn’t for everyone. Instead, you might consider refinancing your home and taking out a chunk of equity in the process. You may have heard that interest rates are rising, and yes, that’s true – but interest rates are still hovering around record lows.
Interested in learning more about how you can leverage the equity in your West Chester or Liberty Township home? Give us a call! We have great relationships with several local lenders. We’d be happy to put you in touch with one of them to discuss your options.