Times are tough for many people. Let's face it, this recession of 2008 to 2010 hasn't been a bed of roses for many people and the housing market may be one of the main reasons why we're in this mess. Ironically, one way to help dig yourself out of a financial hole is to refinance your house or get a second mortgage and that's what I want to talk about today in this article.
Second mortgages, for the most part, have a very legitimate role to play in our society. You should carefully consider whether or not to get one, especially when you need large amounts of money for any number of different things such as paying for your child's education or possibly dealing with a huge and unexpected medical bill.
One important thing when it comes to second mortgages is shopping. You should always shop around before you commit to any specific financial institution, be it a bank or a mortgage company or individual investors. You'd be surprised what a wide range of options you' ll find because no two financial institutions offer the same kind of second mortgages. They will differ on many different things including the amount of interest that you have to pay and also on the time period of the loan.
My parents banked at the same bank for 30 years because they trusted that bank and they had every loan ever made taken right out of that bank. They had recently built their own house for which they got a mortgage at that same local bank. Several years later I found out what the bank was charging them and I shot through the roof! The bank was charging them three percentage points more than the national average, had given them a variable rate loan that had continued to increase year after year, and had given them a 20 year loan instead of a 30 year loan so that their monthly payment was much larger than it needed to be.
And my parents were model borrowers; they never missed a payment in their life and had steady income and no financial problems whatsoever. Their bank should have been giving them the best loan pos sible, not this shady loan. One quick phone call followed by an appraisal of their house resulted in a new loan at a different bank that was not 3% over the prime but 2% UNDER the prime, fixed rate so it never changed, and spread out over 30 years instead of 20 reducing their monthly payments by over $600 per month.
So you see, it pays to shop around!
So when should you refinance and get a second mortgage? I suggest you do so whenever you can find a lower interest rate than what you currently have on your current mortgage. Also whenever you can find a fixed rate versus a variable rate you should go for it. And any time you can stretch the loan period out longer, for instance from a 20 year loan to a 30 year loan then you should do it because that will lower your monthly payments considerably (but increase the interest you pay in the long run).
So there you have several factors to keep in mind when deciding whether or not to take out a second mortgage on your house. Above all, remember that it pays to shop around and I suggest you approach at least five different lenders and see what they have to offer before committing to a single one.
Jason Markum has been an article writer online for well over 13 years. When he's not writing articles, he has a good time running a melamine dinnerware web site where he also reviews closeout dinnerware for your home.
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