You're getting older and you can see all the equity sitting in your home, but you need money now! What are your alternatives? Well, you could sell your home and buy something smaller and spend the difference or you could consider taking out a reverse mortgage. But if you opt for a reverse mortgage, there some very important things you need to know. Basically it works like this. You have equity that...

Why should I get a second mortgage? It's a good way to pay off high interest debt.

Syd Johnson

Second mortgages are basically any type of home loan that you take out while still making payment on the primary mortgage. This is not an arrangement to be entered lightly because you will end up paying a lot of fees and can rack up a huge debt that negates some of the progress you have made in paying off your original mortgage.

Keep loan below Fannie Mae guidelines
One of the most common reasons to get a second mortgage is to keep your home loan amount below the Fannie Mae guidelines. Fannie Mae purchase home loans from lenders all over the country, but only if the loans are in accordance with some very strict rules.

If a lender wants to make sure that your loan does not go over the Fannie Mae limits, they can give you a primary loan for one amount and add a second mortgage for the remaining balance. It’s creative, and there are many alternatives to this arrangement, but it works.

Home equity loans
Another way to get a second mortgage is when you sign up for a home equity loan. The loan is basically secured by the amount of equity you have earned in your home. However, if you do the math, you are reducing your equity.

It’s an exchange. You are exchanging all that hard earned equity for access to cash. If a homeowner is not careful about getting a second mortgage he or she can end up with a very large debt, no equity and a big house payment.

In addition, a second mortgage can lead to an extension on the life of your loan. If you don’t have the cash to come up with a huge monthly payment, the terms on your second loan can extend a 30-year mortgage (your first mortgage) into a 45-year mortgage (with the additional fifteen years to pay off the second loan).

So what are some good reasons for a second loan?
Debt seems to be the primary reason homeowners go into this type of arrangement. Credit card, student loan, automobile and personal debt can all be wiped out and then financed at a much lower interest rate.

Basically a second mortgage is a quick way to convert some of your equity to cash so you can pay off some of your other high interest debt. If used wisely, it can be a powerful debt management tool.

About the Author

This article may be freely distributed as long as there's an active link to http://www.rapidlingo.com
Syd Johnson
Editor

The latest information and news on Mortgages:

Yahoo! News Search Results for mortgage

Mortgage rates drop to another new record
Mortgage rates fell to the lowest level in decades for the 10th time in 11 weeks, as investors worried about the economy. Business - United States - Mortgage - Financial Services - Mortgage loan
Mortgage rates hit decades-low of 4.32 percent
Washington -- Mortgage rates fell to the lowest level in decades for the tenth time in 11 weeks, as investors worried about the economy.
Mortgage rates hit record low: Freddie Mac
U.S. mortgage rates fell in the past week to the latest in a series of record lows as yields on government debt dropped, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.
Mortgage rates at record lows
WASHINGTON (AP) - Mortgage rates have fallen to the lowest level in decades for the tenth time in 11 weeks.
Mortgage rates still heading south
Mortgage interest rates have fallen for the 10th time in the last 11 weeks, according to Freddie Mac's report on what lenders are offering to borrowers with solid credit and 20% down payments or home equity. Freddie Mac's weekly survey...
Yahoo! News Search Results for refinance

Home mortgage refinance rates are low
Home mortgage refinance rates are low right now. How can you capture the best rate?
Owners decide to keep EQT Plaza, refinance debt
The 32-story EQT Plaza, Downtown, has been pulled off the market as its owner, Blackstone Group of New York, has decided to refinance its debt and retain ownership.
Dana Blair of Love Funding Closes $6.56 Million Refinance Loan for Multifamil...
Dallas - Love Funding today announced that its Dallas office closed a $6,560,000 non-recourse loan for the refinance of Aspen Chase, a 288-unit multifamily housing complex located in Dallas.
More homeowners rush to refinance
Low rates means more homeowners are looking to refinance but a shaky housing market puts the damper on new mortgages.
Should you stretch out a refinance?
It might make more sense to increase the length of your mortgage to free up some cash.