Comparing Second Mortgages vs. Home Equity Loans
When homeowners need to access the equity in their home, they often seek out a second mortgage or a home equity loan. Which one is right for you? Here are some key considerations:
-Your credit score: A good credit score is necessary to qualify for a second mortgage or home equity loan. If your credit score has improved since you took out your first mortgage, you may be able to get a better rate on a second mortgage.
-Your home’s value: The amount of equity you have in your home will affect the amount you can borrow and the interest rate you’ll pay.
-Your income and debts: Lenders will consider your income, debts and other financial obligations when determining how much you can borrow and what kind of interest rate you’ll pay.
-Your goals: What do you want to use the money for? Home improvement projects may be eligible for tax deductions, while other purposes may not be.
-Your mortgage terms: If you have an adjustable-rate mortgage, be aware that taking out a second mortgage or home equity loan could reset the clock on your loan and cause your payments to increase.
-Your home’s location: Home values in some parts of the country have recovered from the housing market crash, while others have not. This will affect how much equity you have in your home and how much you can borrow.
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