Is A Second Mortgage Too Much Of A Good Thing?

By Lee Van

So what happens to people who over extend and borrow to much? The borrower is eventually deeply in debt with no hope of getting out of it. People have been known to file for bankruptcy as a last resort. There are unfortunately no reputable money lenders or banks that make provision for small loans to be borrowed for a short length of time. This could become a very good income for one of these agencies if they would like to start such a facility. Some second mortgage loans may extend for as long as 15 or 20 years; others may require repayment in one year.

One drawback to HELOCs, however, is the fact that borrowers are expected to put their homes up as collateral. So, it is important that you think this decision through, before finalizing the loan, because you may be at risk of losing your home- and its equity- if you are late or cannot make your monthly payments. Finally, if you decide to sell your home, must HELOCs will require that you pay off the balance, before completing the sale.

You can also take out a second mortgage, if you need some cash. Like the HELOC, second mortgages usually pay out the loan in one sum, which makes it a convenient option. Second mortgages also have the added advantage of having set payments, at a fixed interest rate. Many companies will charge a lending fee, which will vary from company to company. These fees are usually based upon a percentage of the loan and are frequently referred to as 'points.' If one fee seems too high, don't be afraid to shop around to find one which is better suited to your budget.