Home Equity Lines & Second Mortgages
When you are thinking about a Home Equity Line of Credit or a Second
Mortgage Loan, it is important to look at the pros and cons of each. A Home
Equity Line of Credit is a revolving credit that can give you instant cash
as you need it. This line of credit is based on the available equity you own
in your home. You are not required to use the money of the loan, but if you
do need cash you can just write a check from your Home Equity Line. As the
debt is reduced the line of credit is increased and most of these loans
allow you to make interest only payments. With this type of loan, there is
no set time for you to pay-off the loan. The interest rate is often variable
and the IRS sometimes allows you to deduct the interest paid on a home
equity line of credit. Your tax advisor can discuss these options with you.
The many benefits of a home equity line of credit include immediate access
to cash, improving your home, paying off your some or most of your debt, and
even helping to pay for educational needs.
Second Mortgage
Taking out a Second Mortgage on your home essentially puts a lien on
your property. This kind of loan allows the homeowner to utilize the equity
of the home and not disturb anything on the first mortgage. Usually a
homeowner uses this type of loan when there is a set amount of money needed
to borrow and a fixed interest rate is desired. A Second mortgage does
involve closing costs and the interest rate is usually higher than that of a
first mortgage because there is a higher risk for the lender. The interest
you pay on a first or second mortgage is tax deductible, but there are
certain limitations. You should consult with a tax advisor about these kinds
of deductions.
Below are just a few examples of the benefits you can take advantage of
with a second mortgage.
- Cash available to you
- cover education costs
- Debt consolidation
- Home improvement