Second Mortgage to Pay Off Student Loans: 4 Considerations
You've finally finished school and are ready to start your life. But, there's one thing standing in your way: a hefty student loan. You may be considering a second mortgage to pay it off. Here are four things to think about before making that decision.
1. How much equity do you have in your home?
Your home equity is the portion of your home's value that you own outright. If you have a lot of equity, you may be able to get a second mortgage for a large enough amount to pay off your student loan. If you don't have much equity, you may still be able to get a second mortgage, but the loan amount may not be enough to cover your entire student loan.
2. What is the interest rate on your second mortgage?
The interest rate on your second mortgage will affect how much you'll end up paying in the long run. A higher interest rate will mean higher monthly payments and more interest paid over the life of the loan. A lower interest rate will mean lower monthly payments and less interest paid over the life of the loan.
3. What are the terms of the second mortgage?
The terms of the second mortgage will affect how long you have to pay back the loan and how much you'll end up paying in total. A shorter loan term will mean higher monthly payments but you'll pay less in interest over the life of the loan. A longer loan term will mean lower monthly payments but you'll pay more in interest over the life of the loan.
4. What are the risks of taking out a second mortgage?
Before taking out a second mortgage, it's important to understand the risks involved. One risk is that you could end up losing your home if you can't make the payments on the loan. Another risk is that you could end up paying more in interest than you would if you just kept making payments on your student loan.