Home equity mortage question......?

Question

I don't know anything about a second mortgage and want to know if it's the right thiing for my husband and I to do. We have a house in a skyrocketing market and would like to put down hardwood flooring and remodel the kitchen. Is this a good way for us to finance the project? What are the pros and cons I should be aware of?

Answer 1

Borrowing money to improve the asset that is securing the loan is generally a good idea.

Note that not all improvements will be recovered when you sell. Some improvements will actually damage the value if they are things that make the property hard to sell. Kitchen and bathroom upgrades are some of the best investments and even those tend not to return 100% of the cost if you sell soon after.

When borrowing with a 2nd you can get an equity line. That will have a floating interest rate and will therefore have a payment that changes. Or you can get a fixed term at a fixed interest rate.

Most of the time you want a credit line when you want to borrow for something and then pay it off quickly. Temporary needs. Like a credit card but secured by the house.

A fixed 2nd loan tends to be used when you have a specific purchase in mind where you will want to pay it off over a number of years and not otherwise raise and lower the balance. Much closer to how your 1st mortgage works.

Answer 2

Home equity loans can be used for many things
BUT they are still LOANS which mean debt and $$ lost to interest payments. Unless a purchase is too large to pay for without debt, it should be avoided. Some stores like Home Depot or Lowes offer no interest loans for projects done thru them. You will save a lot on % charges so see if you have that option.
The skyrocketing market just means you have the opportunity to go bankrupt by getting in debt with 2nds.
The rising market is only cash profit if you sell at the higher price, loans make you poor, poor, poor !

Answer 3

Before you take out a "Second Mortgage" stop and consider how much money you actually need for your project. We just had a little work done inside the house. We could have paid cash, but with monies invested at an infinitely greater rate of interest than we would be paying the bank to loan the money, it just wouldn't make sense not to use somebody else's money. We are paying off a $10,000 "home improvement" loan at just a little over $200 a month.
By strict definition, of course, this would be a second mortgage, except for the fact that our home is already paid for, so no other party has first dibs on it. But we would absolutely always do business of this kind through the bank rather than take risks with any flybynight "Second Mortgage Agency". Banks are bound by some extremely strict codes of conduct, and while they certainly will bind you to high standards when it comes to repayment, you will be doing business with straight shooters,
If you have a bank account, you have an already established relationship with a "financial agency". If you haven't, you really should get one. You do not have to have a ton of money to open an account, and it does give you a reputable base, with the ability also to use the free services of their financial and loan advisers. You mention that your house is in a skyrocketing market (I take it you mean real estate market) and this would definitely be a plus. Banks loooove to loan money, since it is one of their primary sources of income, but of course, they carefully weigh their odds of getting repaid. They are not in the Real Estate business, so they sure don't want to be stuck with a house on their hands if the owners default. But if they are looking at a situation where the property is in a booming market, it's a strong plus factor.
They (or any other loan agency) will also want to evaluate YOU, based on your history, your income, your prospects (what your husband and/or you do for a living), how much you are able to afford on repayments - and of course they will make an evaluation of you yourselves when you go eye to eye with their loan officer. If you show up looking like a couple of gum-chewing rag-tags speaking in double negatives, forget it LOL They are very good at what they do. But reputable banks these days are delighted to give a serious couple a fair shake, and if you present yourselves well, you might be pleasantly surprised at how enthusiastic they are to work with you.
If you are a younger couple starting out, you may have parents, or some other close family member with a substantial tie to a bank already, and that would help. I can't make absolute recommendations, not knowing your full circumstances, but the way to get the very best advice and guidance would definitely be through a Bank's experts, and if you present yourselves well, I don't see why you can't go on from there to set up a special Home Improvement loan, with the home itself, of course, being your collateral.
The pros and cons that you mention are going to vary depending on individual circumstances, but when you get together with a bank expert you can be sure that person will advise you well. Hope I may have given you a few thoughts to work on. Good luck.

Answer 4

If being late is your only issue, there is a simple solution. First, one of you needs a part time job. Do this quickly regardless of the hours or rate of pay. Split your bills, with the first mortgage on the pay day at the end of the month, or even a few days into the second month. It would be best if this was a two week pay cycle. Make your off payments on the next pay day. Two weeks later,The second mortgage payment will be two to three days earlier than the previous one, ( 52 weeks / 4 week cycle = 13 payments ) as will all of your subsequent payments. Within several months, your off payments will be at the due date and your mortgage will be fast approaching the late charge date. The part time job will demonstrate your extra effort to correct the delinquency and the negotiator would be hard pressed to justify non-cooperation. This informal schedule allows recovery without the additional cost, irritation and stress of a formal bankruptcy. In financial matters, he who is lost hesitates.The quicker you get started, the sooner this will all be behind you. Good Luck.

Answer 5

Interest rates would be what I would be concerned about. Always a very good idea to re-invest in your investment.
Call around stay with larger well know companies,, no fly by nights, no on line mortgage companies.
And yes it is the best way to finance your project and pay off any old bills in the process.
Good luck

Answer 6

I would advise you to speak to a professional financial advisor...
Send an email to the company below.