Adding a 2nd mortgage to your current mortgage can be a great option for many reasons. It gives you the ability to tap the equity in your home without touching the first mortgage – which might be a very low rate. Normally when doing a cash-out refinance you have to overwrite the first mortgage and potentially lose a lower rate. With 2nd mortgages however, you are able to avoid doing this and still tap into the equity of the home. There are two 2nd mortgages available and each has pros and cons.
The Payment with a HELOC is interest only for 10 years and then it becomes a fixed payment for 15 years at whatever the remaining balance is from the 10 year draw period. Interest-only payment is nice for some borrowers because it’s a lower payment than a standard principal and interest. You also only pay on what you draw – so if you take a heloc for 100k but you only use 10k you only pay interest on the 10k. You still have the ability to take out the extra 90k at any time when needed. The bank gives you a checkbook with which you can withdraw the funds at a moments notice.
Chris Butts is a Loan Originator and Sales Manager at Leader Bank. He has been in the mortgage industry for over 15 years and is committed to providing his customers with the highest quality service. His extensive experience and knowledge allow him to effectively and consistently help his customers during the loan process, whether it’s a first time home buyer, a refinance or purchasing a dream home.Learn More About Chris
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