Second Mortgage

Taking cash out of your home with a second mortgage

A second mortgage can be a good solution if you want to take cash out of your home but don’t want to refinance your primary mortgage. A second mortgage is a long-term loan, with fixed monthly payments and a fixed interest rate, that uses the equity you have in your home as collateral. It is similar in structure to a primary mortgage.

There can be many reasons to take out a second mortgage. For example, you might use it to finance a renovations project that will increase the value of your home. You might also take out a second mortgage to replace high-interest credit card debt or to obtain the funds needed to make a downpayment on an investment property.

A second mortgage comes with a predictable, fixed monthly payment that will never change for the duration of the loan. It is a good option for many, but it is not the only option available. When you call us for a free consultation, we will show you all the options and numbers, so you can decide which would work best for you.

Second mortgage features

A second mortgage is a long-term loan that uses the equity you have in your home as collateral.

Some of the characteristics of a second mortgage are:

• Long-term loan contract similar to a primary mortgage. All the borrowed funds are paid to the borrower at the beginning of the contract

• Fixed interest rate, generally a little higher than that of a primary mortgage (used to purchase a home)—but lower than the interest rates of most credit cards and personal loans

• Fixed monthly payments that do not change over time: If you pay more than the required minimum payments, you will be able to pay off your loan faster, but your monthly minimum payments will stay the same

• Can be a good solution for someone with a fixed income looking for a long-term loan, for example to refinance high-interest debt or to obtain a downpayment on another property

Second mortgage vs. Home Equity Line of Credit (HELOC)

Another option for taking cash out of your home is getting a Home Equity Line of Credit (HELOC). A HELOC is similar to a second mortgage in that they are both loans that use the equity in your home as collateral. Key differences include:

• A second mortgage has a fixed interest rate, whereas a HELOC has a variable interest rate

• A second mortgage is a one-time loan that you pay off over time, while a HELOC is a revolving credit line

• Second mortgage usually have slightly lower interest rates than HELOCs

• When you pay down a HELOC over time, your minimum monthly payment also decreases (similar to how monthly payments on a credit card decrease with a lower balance). On the other hand, a second mortgage has a fixed monthly payment that doesn’t change until the loan is paid off. That means that if you start paying more than the minimum monthly payment on a second mortgage, you will pay your loan off faster, but your minimum monthly payment amount will stay the same.

Contact us for a detailed options and numbers for your specific situation. You can call us at 310-294-9417 or self-schedule a Free Brainstorming Consultation here.

“I am a very busy person and Alejandro handled everything for me. I have refinanced two homes and bought two homes using him as the broker. He was a pleasure to deal with.”

—Janice, Artist & Real Estate Investor