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Take Advantage of the Second Home Boom – Use a 2nd Mortgage
Stock market crashes, low interest rates on savings accounts, it seems that they only viable market to invest your capital in is real estate. With low interest rates on mortgages and the median price for existing single family homes increasing in value by 27% between 2001 and 2004 , it's no wonder that people are buying second homes and taking out 2nd mortgages.
The facts speak for themselves when it comes to assessing just how popular purchasing a second home is. With an increase of 40% of people purchasing second homes between 1995 and 2000 , consumers have certainly latched onto the fact that property is proving to be a very lucrative investment. At present investing in property will help you to build a substantial retirement fund, or capital that you may need for any other future purpose. If you are thinking of purchasing a winter retreat or a Florida holiday home you can take out a 2 nd mortgage or use the equity in your principal residence, known as a home equity loan.
Let's focus on both of these options available to you:
It is well known that lenders are tougher on 2 nd mortgages than they are on principal residential mortgages as you income is being used to pay mortgages on two properties. As the median income of second home owners is normally at least $20,000 above the national median , then this extra financial demand is normally very much within your reach. You may find that interest rates for a 2 nd mortgage will be slightly higher, but if you take into consideration the potential profit you can make, this will outweigh the extra cost.
Home Equity Loan
As the housing market has experienced a boom in the last few years, many homeowners are finding that they have a huge amount of equity in their houses. Therefore, it is worth considering taking out a home equity loan to use as a substantial down payment or to pay in full for the second home. As per a 2 nd mortgage, interest rates do tend to be higher than a first mortgage.
The best advice that can be given is to research each option thoroughly before making a decision. Shop around for the best rates with affordable fees attached. Also remember that if you are thinking of renting out your holiday home whilst you are not there, this is more of an investment property and you should investigate an investment property loan rather than a 2nd mortgage or home equity loan.