If you’ve ever wanted to apply for a loan, you might have come across the concept of second mortgage loans in your travels. These loans are essentially a second form of mortgage which is applied to a property you already own. You could either own the property outright or by mortgaging it as you go. A second mortgage loan could be an excellent way for you to shore up some finances for that project or something similar you’ve been saving for.
If you’re reading this, you might be thinking “great – I’ll get started right away”. Not so fast, though. A second mortgage might not be for you. These loans can be excellent and accessible ways to get money, but some people just won’t benefit from them in the same way as others might. Before you set off applying for a second mortgage loan, make sure you fit the bill. Here’s my guide to when a second mortgage loan might be right for you.
When you’re improving your home
A second mortgage is an excellent option for home renovation or improvement projects. If you’ve been meaning to get around to that extension, building that conservatory, or adding another room to your home, then a second mortgage can really help you to get cash for materials, building help, and any other home improvement expenses you might have.
When an important life event is coming
When someone in your family is about to get married, it’s a joyous occasion worthy of celebration. That’s not so true, though, if you don’t have the finances. A second mortgage loan can help pay for a wedding, especially given the high average cost of such a ceremony. Birthday parties, anniversary celebrations, and other events are also times when you might want to plump for a second mortgage.
When you’re planning a holiday
Thinking of getting away from it all and holidaying somewhere sunny? I totally sympathize – I daydream about it all the time. A second mortgage is a perfect way to finance that holiday. Many holidays these days cost a fair amount, so if there’s decent equity in your home then a second mortgage can make a serious dent in the cost of a family holiday (or even a solo venture!).
When you need a new car
There is truly no worse feeling than being halfway to work on an important day only for your car to sputter and die. You call your breakdown service, but it’s no good – the car has finally given up the ghost this time. Get yourself a second mortgage to finance a new vehicle and have peace of mind. If your car is still salvageable, you could still get a second mortgage to help you pay for the repairs.
To consolidate debt
Sometimes, over the course of your adult financial life, you’ll accrue debts from various different sources. When this happens, you’ll probably find it quite difficult to keep track of where all the debts are located. A second mortgage loan can help you pay off all these debts, and then you’ve only got the mortgage itself, which is a single source of debt. Much more manageable.
When you want to expand your business
You’ve been doing business for a while and you’re booming, but not to the point where the business is making enough to help you expand. You notice an underserved niche that you could fill with your product, but you don’t quite have enough money to pay extra staff. What do you do? You take out a second mortgage, get your staff on the payroll, and ride your successful idea to victory.
When something unexpected happens
The phrase “expect the unexpected” is as useful as it is useless. Obviously, you can’t expect the unexpected; that is, after all, why it is unexpected. However, you should always be prepared for something you didn’t expect to happen. One way to do this is to always have a reputable second mortgage provider on hand. That way, if something does go wrong, you’ll have somewhere to go.
To pay for education fees
The average annual cost of UK tuition fees at universities is now £9,188 per year. That’s a pretty significant sum. A second mortgage could help you eradicate the uncertainty and financial issues that could come with student debt. Obviously, your kids could always apply for a student loan, and there’s nothing wrong with doing so. Still, wouldn’t you prefer to have it over and done with?
When you want a loan with lower interest fees
If you’re looking to avoid astronomical interest fees, that’s when you should plump for a second mortgage loan. The interest rates on these loans tend to be lower than other loans, simply because the loan is secured against your home, giving the lender a degree of security. You’ll pay less each month than you would with other types of loans because of this.
When you need a higher amount of money
Because second mortgages are calculated against equity (usually), you’ll often be able to borrow a much higher amount of money than you would with other types of loans. If you need a serious amount of cash for something significant in your life, a second mortgage loan is probably one of the only loan types you can rely on. If you can take this option, you definitely should.