Why Would Someone Take Out a Second Mortgage?
Second mortgages are not only hard to be approved for, but they are also risky. However, despite their risk, there are some reasons you may benefit from taking out a second mortgage.
- Second mortgages allow you to access the equity in your home, which can give you more cash flow for renovations or other improvements.
- Second mortgages can also help you consolidate your debts. By accessing the equity in your home, you can make just one larger loan repayment than several smaller ones.
- Second mortgages are an alternative to refinancing your existing mortgage, allowing you to avoid break costs, exit fees, and other costs associated with refinancing.
- Second mortgages can allow you to increase the value of your home by giving you the funds you need to make renovations and repairs.
- If you are going to be the guarantor on a relative’s home loan, securing a second mortgage can help you provide more security for the lender.
- If you want to refinance but your fixed-interest rate is higher than the current interest rate, a second mortgage is a great way to borrow additional money.
What are the Risks of Taking Out a Second Mortgage?
While there are many reasons you may take out a second mortgage, you should also be aware of the risks of doing so, including:
- Increased debt and managing two repayments
- High fees and lower LVRs
- Limited options and fewer features
Before applying for a second mortgage, consult with the brokers at Mortgage House. We can assess your current situation to help determine if a second mortgage is the right solution. If so, we can help you secure a second mortgage with competitive rates and beneficial features. If not, we can help you find a better option.