Adjustable Rate Refinance - Second Mortgage

Second Mortgage

A second mortgage is a home equity loan. A second mortgage uses the collateral of your home to secure a loan. It's that simple. However, there are many factors involved that can make such a loan good for you or bad for you depending upon your intent. If your looking into second mortgages, for instance, because you want to pay off unsecured debt - like a credit card - then you will be converting the unsecured debt into a secured debt with your own home as security. You could lose your home if you default.

Can a second mortgage really be bad?

Yes. A second mortgage can make thing's worse for you. The Federal Trade Commission (FTC) warns:

"The lender doesn't care if you can't keep up with the monthly payments. As soon as you don't, the lender will foreclose-taking your home and stripping you of the equity you have spent years building. If you take out a loan but don't have enough income to make the monthly mortgage payments, you are being set up. You probably will lose your home."

The FTC explicitly warns that you should not agree to a second mortgage if you don't have enough income to make the monthly payments. It is imperative that you study the second mortgage agreements to understand what exactly is expected of you and how much you really can afford. If their is a balloon payment at the end, for example, and you cannot pay it- you could legally lose your home! Beware of unscrupulous mortgage refinancing. It happens more often than you may realize.

Related Resources:

Privacy Policy
Terms of Service