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6 Benefits of Taking Out a 2nd Mortgage in 2019

A second mortgage is a home loan that allows you to borrow equity from your home. Most homes gain in value over time, which leads to equity build up. Also, as people pay down their mortgages, their equity in the property increases. Second mortgages � both a home equity line of credit (HELOC) and a home equity loan � are an effective way to use the equity of your home for things you want or need at a low interest rate.

You can get a second mortgage as a line of credit that you can use as you like in the amounts you like over time. Or, you can get a home equity loan and take all of your available equity in a lump sum.

If you are considering taking out a second mortgage, consider these benefits:

#1 Home Prices Are Rising

As home prices are rising in 2018 and 2019, it means that people will have more equity to borrow. Also, borrowing from your home, which is secured loan, means that you can borrow more funds than if you were to take out a personal, unsecured loan. Most lenders allow you to borrow up to 80% of your home's value, minus what you owe.

For example, if you have a $300,000 home and you owe $200,000, you can borrow $240,000 minus what you owe, so you could get $40,000 in cash. You could take that as a lump sum or a line of credit.

#2 Interest Rates Are Low

Even as interest rates are rising overall in the mortgage industry, you can still get a second mortgage at an affordable rate that is much lower than a credit card or personal loan. Someone with decent credit should be able to get a second mortgage home equity loan at 6% or 7%. If you get a HELOC, you will enjoy a lower rate during the 5-10-year draw period. At that time, your rate could go up or down. Current HELOC rates for the introductory period still are in the 5% to 6% range.

You can borrow a lot of money at a much lower rate than you otherwise could with a second mortgage.

#3 Tax Advantages

While there were tax law changes that took effect in 2018, you still can have some tax advantages with second mortgages. If you are taking the money out to improve your home, you may be allowed to deduct the mortgage interest off of your taxes. Check with your CPA or tax advisor to confirm this.

#4 It Is Getting Easier to Qualify

Credit markets got tighter after the housing meltdown of 2008, but lenders are making it easier now to get second mortgages. While you will still need to show that you have the income and credit to pay off the loan, many borrowers with under 700 credit scores still may qualify.

#5 More Lenders Are Doing Second Mortgages

As mortgage rates for 30-year fixed mortgages are getting near 5%, fewer people are refinancing their first mortgages and taking out cash. If you got a fixed rate loan in 2017, you may be enjoying a rate as low as 3.3%! You would be daft to refinance that to take out cash.

So, more lenders are pushing second mortgages. More lenders are getting into the game. This is a great thing because competition nearly always is a good thing in the markets. If you shop around enough, you could find a lower rate than you might think. Make sure you compare at least three lenders. And tell them that you are comparing them! See if you can get a lower rate out of it.

#6 Fixing Up Your Home Can Lead to Price Increase

There is quite a housing shortage in many parts of the US. This means prices are going up. If you pull out equity with a second mortgage and improve your home, you could see a serious increase in the value of your home. That is always a good thing!

The bottom line on second mortgages is today is a great time to get one. Rates are still low, home prices and equity are rising, and they are easier to get than they have been in years.

Nationwide Mortgages provides useful info online in regard to 2nd mortgages that have opened the door for many American home financing opportunities. Our second mortgage department has pioneered new territory with very competitive "2nd mortgage rates" online. Our ability to secure loans for homeowners with sub-prime and bad credit has set us apart from our competition. Accessing cash through your home has become paramount to personal investing. Ask our financing consultants how you can save money by taking out a second mortgage or HELOC loan.

Banks Announce More 2nd Mortgage Programs
For years, homeowners have been advised to not simply let their mortgage sit and languish. Periodically, it's good to review the current loan market and interest rates as well as your situation and then compare it to your home loan. Therefore, many end up refinancing after a few years. But refinancing isn't always the best option. Many people end up deciding that instead of a refinance, a second mortgage is closer to what they are looking for. The recent announcement that banks are now offering more second mortgage programs than before means that there's never really been a better time than now to investigate this loan option.

What is a 2nd Mortgage?

Recently updated by James Swift

In the simplest terms a 2nd mortgage loan is an additional lien that is secured by residential real estate. Title companies that work for the bank place these liens in 2nd position on the property title, thus the term, "second mortgage." If you were to default on the loan, the bank actually has the right to take your home from you. Some industry representatives often refer to these as "junior" or "subordinate" liens. There is some risk, but with interest rates low and these additional second mortgage programs being introduced, it could be the right move for some to consider.

Typically, there are not too many restrictions if any, in regards to how you spend the money � though some of these newer programs recently announced by lenders may have tighter restrictions. Prior to the infamous "mortgage crisis", many home buyers utilized a 2nd mortgage to help them avoid private mortgage insurance that is often required when a borrower come up with less than a 20% down-payment. You probably know what happened, as many of these people bought houses they couldn't actually afford so the bank foreclosed on both the 1st and 2nd mortgage liens in high volumes. Unfortunately, this gave 2nd mortgages a bad name and most bank stopped offering second mortgage loans all together. The good news for many of you is that 2nd mortgage programs are back because of demand and the uptick in the home equity marketplace.

Second mortgage loans have been around for decades and were designed for people that needed extra money but didn't want to refinance their existing loan. This is especially true for those with a good interest rate already locked in on their first mortgage. Second mortgages usually have low interest rates compared to first mortgages, which helps make them more attractive.

As for the highly anticipated new home equity programs just announced by banks, they're designed to help make it easier for homeowners to qualify for a 2nd loan without being required to refinance their 1st mortgage with which they were content with. While decent credit scores and employment history will still be needed, these programs have less requirements and feature lower equity standards than older programs offer. It's expected that these programs will make a big difference in the lending environment throughout 2016, and as such they're an option that homeowners will likely be paying attention to.

If you're in need of extra cash and don't want to refinance, 2nd mortgage loans could be exactly what you're looking for. And thanks to these new programs, it may be easier to get a great one than you suspect. Talking to a good lender today could help you find the loan that is right for you.

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