When a Second Mortgage Makes Sense
If you’re not in the ultra-rich capacity, chances are you’re like most people who are living on a tight budget. There are occasions when you will need a big chunk of cash on hand for a variety of reasons. If you own a home and need that cash right now then it could be right at your fingertips.
Many people who need extra money on hand may consider going the rout of maxing out their credit cards or taking out a personal loan. Depending on the reason why you need some extra serious money you could consider taking out a second mortgage instead.
Why not use the equity you’ve built up in your home and take advantage of the low second mortgage rates that are still available? Consider the interest rates that you would pay on your credit cards or what a lender might charge for a personal loan.
If you check out the going rates for a second mortgage versus the amount of interest you’d be paying for your credit cards or a personal loan, you might be in for a bit of a shock.
Now, since you are using your home as collateral for a second mortgage you might want to consider your reasons for getting a second mortgage carefully. Budgeting and planning need to be both practical and realistic so you don’t end up in a financial bind down the road. Make sure you will be comfortable with the additional debt involved before you apply.
Most Common Reason to Get a Second Mortgage
The most common reasons people consider getting a second mortgage include the following;
Home Renovation, Repairs and Improvements
Home renovation projects are one of the most common reasons to get a second mortgage or a HELOC (Home Equity Line of credit). This is especially true if you are living in or buying an older Vancouver home. Using a second mortgage to renovate, repair or add improvements to an older home can often have a terrific R.O.I. (Return On Investment).
The best renovation projects that can have the best R.O.I., especially if you’re thinking of putting your home on the market, includes kitchen and bathroom renovations, or replacing an aging roof. Other repairs such as those needed for the foundation or to replace old electrical or plumbing can be quite expensive.
Buying a Second Home or Cottage
Real estate in Vancouver and throughout the province is both vibrant and largely a sound investment. You might be thinking that now might be the right time to buy a second property which you could use to pay for itself as a rental property while reaping the awards of property appreciation down the road. However, coming up with the money for the down payment might be a bit problematic. A second mortgage might be just the perfect solution.
Or, you might be thinking of buying a weekend retreat or cottage. Maybe you’re dreaming of some place out on a lake or nestled away in a quiet valley where you can escape your busy and hectic lifestyle for a few days or weeks each year.
Your children might be at that age where they’re ready to graduate from high school and go to college or university. Let’s face it – college and university tuition is getting pretty pricey. University tuition alone can average around $10,000 per year and that might not even include accommodations and living expenses. Paying off such a hefty student loan can be a horrendous burden for a young person who has just graduated.
Many folks want to give their kids a helping hand and a second mortgage might be the best way to give your children that extra boost in starting out their professional lives with a clean financial slate.
Whatever your reasons for getting a second mortgage, just make sure that you’re in good financial shape before you take the plunge.