Taking out a 2nd mortgage for debt consolidation
is one of a host of reasons a homeowner may wish to take out a 2nd mortgage on
their home. This practice, also called
refinancing, is also common for people who are able to renew their mortgage at
a better rate, or get a shorter amortization period. Are you interested in taking out a 2nd
mortgage for debt consolidation? Read on to find out more.
What is a 2nd
A 2nd mortgage is an additional mortgage that can be taken
out from the bank while the first mortgage is still active. The homeowner then uses the newly acquired mortgage
to pay off the first. Refinancing allows homeowners to tap into the equity they
have already built up in their homes. Homeowners may do this for several
reasons, such as securing a lower interest rate, using the extra funds to
invest in another venture, or to consolidate their debt. This practice is also
commonly called taking a home equity loan, or refinancing your mortgage.
an Additional Mortgage for Debt Consolidation
Some homeowners find themselves deep in consumer debt,
paying a large amount of monthly interest on their loans. If they have enough home equity, they may be
eligible for a loan from the bank against their home. With this loan, they can
immediately pay off all outstanding debts, as well as consolidate and decrease the
overall interest rate they will owe monthly. Typically, credit card interest
rates are much higher than home equity loan rates. For this reason, it can be
very financially sensible to take out a 2nd mortgage for debt consolidation.
If you are interested in seeking more information about
securing a 2nd mortgage on your home, the next step is to talk to a mortgage
expert and get an opinion. It is important to examine your decision and how it
fits into your larger goals. Usually, a 2nd mortgage is a good option for
homeowners who do not plan to move for several years. Mortgage professionals
can tell you which interest rate programs will work best for you within your
larger, multi-year financial plan.
Taking out a mortgage is a financial undertaking that has to
be done by a professional and must uphold to legal scrutiny. For this reason, there are fees associated
with taking out a mortgage. Before you go forward with this decision, make sure
you are aware of all the fees that might be applicable in the transaction – and
be sure to crunch the numbers and make sure the move is really beneficial. It
is also important to remember that mortgage rates are historically low at the
moment and are likely to go up. Your mortgage planner will help you navigate
these waters and may recommend a fixed rate rather than a variable rate
For many Canadians, a 2nd mortgage is a very sound option
for debt consolidation. If this seems like something that might be a good
option for you, learn more today, and a decade from now, you will be closer to
your financial dreams.