Mortgages are fairly common. Anyone who buys a home or knows they will receive a mortgage loan until the property is paid off entirely or you decide to move.
However, most people do not know that you can take out additional mortgage loans on your home, essentially using it as collateral.
Should you take out a second mortgage?
For some people, taking out an additional mortgage is extremely helpful when it comes to your child’s college education or an expensive trip you’re planning.
There are a few circumstances where taking out a second mortgage may be a good idea, but you need to be expanding your wealth in some way. For example, you can start a business with that loan or go to school after taking out a second mortgage.
What if you want to pay off debt?
It’s more challenging to justify a second mortgage to pay off credit card or consumer debt because you are risking your biggest asset, your house.
It seems tempting to take out a low-interest mortgage and pay off any high-interest credit cards. But it puts you in a circular phase where you may have to depend more on your credit cards because you have two mortgages to pay.
Also, it is incredibly risky to have multiple mortgages if you lose your job or become disabled.
What should I do?
The answer depends on your ultimate intentions. If you think the prospects of a second mortgage may increase cash flow into your household, it may be a great option.
But for most people, it’s just another bill they have to pay. It’s better to find other alternatives, like bankruptcy, to address consumer debts.