One of the benefits of owning your own home is the chance to build equity. The longer you own a property, the more value it accrues. This happens for two reasons. First, you pay a little bit towards the principal balance every time you pay your mortgage. Second, property values tend to increase over time, increasing the amount of equity in your home.

This built-up equity is something you can use. You can borrow against it by taking out a second mortgage. A second mortgage is simply a mortgage or lien against a property that already has a loan against it. Here is a closer look at how these loans work and how they can be used.

Who Can Get a Second Mortgage?

Typically, lenders will lend up to 80 percent of the home’s value. For a second mortgage, the new loan’s value and the value of the existing loan will both be considered. For a lender to offer a second mortgage, the total amount of the two loans combined cannot be more than 80 percent of the homes’ value.

Lenders will also consider the borrower’s credit history. Serious credit issues will make it difficult to get a second mortgage. Lenders want to see that their potential borrowers have the ability to repay the loan.

What Are Second Mortgages Used For?

There are no rules that dictate how you can use a second mortgage. However, these loans are used for several common reasons. These include:

Consolidating Debt

Mortgages typically have lower interest rates than personal loans and credit cards. As such, they are a good option for consolidating and paying off existing debts.

Starting a Business

It takes a lot of money to start a business. A second mortgage may provide some necessary funds to get a business off the ground.  These loans are often more affordable than a business loan, provided you have enough equity in the house. It can also give you some added money if the money available from your business loans is not sufficient to cover your business start-up costs.

Paying Medical Debts

Large medical bills can be a severe drain on your family. If your medical providers are not able or willing to work with you on payment plans, you may need to consider a second mortgage to pay them off. Always look for payment plan options first, but if that’s not a possibility, be willing to consider a second mortgage as an affordable option.

Education Expenses

Going back to college can be a costly endeavor. If you need to earn a degree and need money to cover tuition and other expenses, your home could be a source of that money.

Large Purchase

Do you need to buy a new car? Are you considering purchasing a recreational vehicle or boat? Your home equity could provide the most affordable option to finance that purchase. Before you do, crunch the numbers and make sure you can afford the loan because you don’t want to tie your home into a shorter-term asset like a car if there is potential for that choice to make things too tight for your family.

Your home’s equity is one of your most significant assets. If you have a large expense that you just can’t seem to cover, don’t be afraid to use it. Always budget carefully, though, to ensure you can repay what you owe because the money is tied to your home. When used wisely, a second mortgage can be an affordable source of some extra cash.



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This is not a commitment to lend. Terms and conditions of programs, products and services are subject to change. All loans are subject to credit approval and property appraisal. Certain restrictions may apply on all programs. First Home Mortgage Corporation of America, First Home Mortgage Services, and First Home Mortgage Company of Maryland are d/b/a’s of First Home Mortgage Corporation. First Home Mortgage Corporation is licensed in Connecticut, Delaware, District of Columbia, Florida, Georgia Residential Mortgage Licensee (Lic. #23135), Indiana, Kentucky, Maine, Maryland, Massachusetts Mortgage Lender and Broker (Lic. #MC71603), Michigan, New Hampshire, Licensed by the New Jersey Department of Banking and Insurance, North Carolina, Pennsylvania, Rhode Island Licensed Lender and Broker, South Carolina, Tennessee, Vermont, Virginia, West Virginia. Equal Housing Lender. First Home Mortgage Corporation NMLS ID #71603 ( Privacy Policy.