One of the advantages of owning a home is the ability to build up equity in the home that can then be used to pay down bills, complete renovations or to make major purchases. This is often done through a home equity loan that leverages the equity to provide the homeowner with a line of credit.
In some situations, a home equity loan may not be the best option. An alternative consideration is a second mortgage, which is a loan against the value of the home. A second mortgage, when interest rates are low, can be a good option to avoid the costs of PMI or Private Mortgage Insurance which is typically required when the homeowner only has a small initial down payment on the residence. It can also be used to tap into the cash value of the home to provide funds for improvements, additions, making purchases or other financial requirements.
What to Consider
Understanding just how much you should consider for a second mortgage value can be challenging. A second mortgage loan calculator is a helpful tool that will allow you to find out the actual cost of the second mortgage based on the different variables.
In general, a second mortgage will have a slightly higher interest rate than a conventional first mortgage. The second mortgage loan calculator should also allow you to see the additional costs of obtaining the loan including fees and origination fees.
The total value of the second mortgage will usually be determined by a home appraisal. This will be a cost the homeowner will also need to consider, and it may or may not be included in the data required by an online second mortgage loan calculator.
Ultimately, the lender will determine how much of a second mortgage to offer. It is important to do your homework and know what you need to cover your planned
expenditures, as it is recommended to keep your second mortgage as small as possible to avoid hefty monthly payments between the primary and secondary mortgages.
At Guaranteed Rate, we offer a second mortgage loan calculator for immediate information about rates and payments.
