To quote directly from Wikipedia, the free on-line encyclopedia, A second mortgage typically refers to a secured loan (o mortgage), that is subordinate to another loan against the same property.
Some property owners have two, three or even four loans against the same property, but one or two are the norm.
A second mortgage is called a subordinate because , if the loan goes into default, the primary or first bond/loan gets paid off first – in other words it takes first preference in the eyes of the lender.
So, we ask ourselves, what exactly IS a second mortgage, and why on earth would a home owner want another bond to contend with?
Many good reasons come to mind when one is thinking of taking out a second mortgage:
It can free up immediate large sums of cash,
Help with general financing , whatever the needs are
What exactly are these benefits we are talking about with Second Mortgages –
- they can have many benefits for the borrower –
- An immediate large lump sum can be borrowed at a fixed interest rate
- Pay the loan back with fixed monthly payments
The reasons for taking out a second mortgage is varied and differs from one individual to the next –
The home owner can take out the second bond to do home improvements.
He can take out the second bond to consolidate debt.
He could perhaps want to just simply take out a much needed vacation, or even pay for medical bills or a wedding – the reasons are varied !
This is a biggie!!
The loan is fully tax deductable
For debt Consolidation one can pay off multiple loans with a single loan having a far lower rate of interest.
Debt Consolidation may be especially useful for people who have heavy credit card debt – this could be especially useful as one could then obtain a low fixed rate of interest compared to credit cards that carry a much higher interest rate (APR) – ANNUAL PERCENTAGE RATE.
A second bond could pave the way to Debt Wellness.