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A Second Mortgage Vs. A Home Equity Loan
by: Jay Moncliff
If you own your home and need a loan for whatever reason you have probably
considered a second mortgage or a home equity loan to help you pay your bills,
buy a new car, or pay for some other investment. However, you probably don’t
know whether a second mortgage is better or worse than a home equity loan for
your particular situation. However, don’t despair because there are some tips
that will help you decide whether a second mortgage or home equity loan is for
you.
Second Mortgage Tip #1 One Time Expenses
A second mortgage is the preferred option if you have a one time big expense
you need to cover. Examples of this include remodeling your kitchen, paying for
a wedding, or buying a new car. In these instances a second mortgage will
probably work best for you; however this will depend on the equity in your home
and your credit score.
Second Mortgage Tip #2 Recurring Expenses
If you are going to have recurring expenses then you might not want a second
mortgage because a home equity loan will work out better for you. The second
mortgage is best for large amounts of money at once while recurring expenses
like tuition are better paid for with a home equity line of credit.
Second Mortgage Tip #3 Repayment
You will also need to consider your ability to repay and which option will
suit you best. A second mortgage can be financed similarly to your first
mortgage, while the home equity loan can be paid back more like a credit card.
Consider your financial position and ability to make monthly payments before
applying for either a second mortgage or a home equity loan.
If you still don’t know whether a second mortgage or home equity line of
credit is for you, then talk with your lender and see what is recommended for
your equity, credit, and ability to repay the loan.
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