Study Guide To Debt Consolidation Through A Second Mortgage

By Stephanie Robins on March 5, 2010, 6:03 am Posted in Business News

Do you find yourself head over hills in debt? Are there hospital bills, car payments or school tuition fees that need to be paid? Is your high interest credit card debt mounting? When a home owner’s debt becomes overwhelming a solution is needed. Here are some tips that offer solutions for your debt problems.

Your Home – A Source Of Cash

Home owners with home equity can access the cash in that equity. What is equity? Equity is the difference between what is owed on a first mortgage and the appraised value of the home. A home appraised at $125,000 with a mortgage of $100,000 has $25,000 in equity.

How Does A Second Mortgage Work

The existing home loan is the first mortgage. The available equity in the home can be used as collateral for a second loan. Second mortgages typically have higher interest rates than first mortgages. The borrower can choose a fixed rate or variable rate. Credit rating, income and the total loan to value are used by lenders to set rates and terms.

Rates, Terms and Options

The second mortgage rate is higher as it is in second position with more risk for the lender. In case of default the first mortgage will be paid. If cash is left over then the second will be paid. The total loan to value may be 85% but some lenders allow second mortgages equal to 125% of the appraised value. The length of the loan can vary from 15 to 30 years but typically less than a first mortgage. The rate offered should be significantly less than the rate on the current credit cards. Obtain quotes from different lenders to get the best deal.

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3. Can I Write Off Credit Card Debt On A Debt Consolidation Loan?
4. How Does An Interest Free Debt Consolidation Loan Work?
5. Little Known Advantages Of A Bill Consolidation Or Debt Help Program