Are you getting offers in the mail to get a second mortgage on your home, but you keep throwing them away? You may want to consider holding onto those letters, since a second mortgage may be useful. Here are a few reasons why you'll want to get a second mortgage on your home.
For Making Home Improvements
You may love your home's location, but really want to make some major modifications to it. This includes building a second-floor addition, an attached garage, and finishing your basement. All of these improvements cost money, and chances are that you do not have the necessary cash on hand. This can be a good reason to get a mortgage on your home.
Use that money to improve your home now, and then slowly pay off the debt through a mortgage. All of the improvements that you make will be also increase the value of your home, so when it comes time to sell, you'll make some of that money back.
To Get Cash All At Once
People take out second mortgages on their home for a variety of reasons. If you're in a situation where you need cash for a big expense, a mortgage may be the best way to do it. For example, if you have a child going off to school and you need cash for tuition and housing, a second mortgage can be a great way to do it. You'll have the cash on hand to pay the bills, rather than have to go through financial aid and receive the money each semester.
To Avoid PMI
When you got your original mortgage, you may have been forced to get a loan with private mortgage insurance, also known as PMI. This is for home buyers that do not have 20% of the home's value for a down payment and protects the lender if you were unable to make mortgage payments. Since you have below 20% for a down payment, it puts you at a higher risk than other lenders. Unfortunately, you could be stuck paying PMI for the life of the loan depending on your situation.
Getting a second mortgage will allow you to pay off the first mortgage and start over with a second one. If you now have 20% of the home's value, you can avoid paying PMI and lower the cost of the loan over its lifespan. This is ideal for homeowners that know they won't be moving any time soon. For more information, contact your local home loans office.