Second Home Mortgage

A second home mortgage is an opportunity for a person to expand his financial status without having to use more expensive methods of borrowing, such as credit card debt. Several things need to be examined in second home mortgages. One is the interest rate carried by the loan. This type of loan may carry one of two kinds of interest rates: a fixed rate (FRM) or an adjustable rate (ARM). A FRM means that the interest percentage will not change over the life of the loan. An ARM means that the percentage can change along with the federal prime interest rate. An adjustable rate can be advantageous or a liability, depending on how the prime rate changes over the years. Most people will benefit from a fixed rate so that they can budget their monthly payments.

One important aspect for a borrower to consider when applying for a second home mortgage is what will happen to the equity on the house once the loan takes effect. Some lenders offer loans of up to 125 percent of the house's value. This type of funding can be disastrous if real estate values fall or if the homeowner needs to sell the house within a few years and doesn't have enough equity to pay off the loan. Another consideration for applicants for second home mortgages is that the use of second mortgages increases the probability that if a crisis occurs in the life of the debtor, the home may be lost to default. Some of this risk may be eased by taking out mortgage insurance, which covers the homeowner in case of illness, accident, or death.

A third consideration for the borrower is to look into the options of credit and equity lines before settling on a contract. It pays to shop around because different lenders offer much different terms and interest rates. One difference between lenders is the kinds of fees that the company might charge for lending money. The amount charged for fees is a point where a borrower can bargain with the lender. Some contracts will charge penalties for paying off the loan early. The rates for late payment fees also vary widely. Another fact to research is what the loan can be used for. Some second home mortgage loans have no restriction; others are specific about what the borrower can use the money for.

Lastly, when thinking about getting a second home mortgage, spend some time in prayer. The Lord wants His children to think hard before borrowing money and desires us to follow His principles in all we do. The apostle Paul advises us, "For our rejoicing is this, the testimony of our conscience, that in simplicity and godly sincerity, not with fleshly wisdom, but by the grace of God, we have had our conversation in the world, and more abundantly to you-ward" (2 Corinthians 1:12). The Lord does not want us to depend on ourselves when making decisions like taking out second home mortgages.

Add to: File Insurance Business article Teen Photo Images