Second Mortgage

Second mortgage is a mortgage placed on a property after the first mortgage and subordinate to the first mortgage. People often take a second mortgage on a residential property to recapture some of their gain and/or appreciation to be used for other investments or expenses.

A new second mortgage can provide a tax deductible source of funds to consolidate debts and reduce your monthly payments. It's estimated that you can save three times more on a fixed rate, simple interest second mortgage than paying credit cards with high compound interest. The interest portion of second mortgage payments can be tax deductible. The tax savings can be substantial when compared to paying on other non-deductible debts. 

Some second mortgage loans may extend for as long as 15 or 20 years; others may require repayment in one year. You will need to discuss the repayment terms with the individual mortgage company and select one that offers terms that best suit your needs. 

Many companies will charge a fee for lending you money. The fee is usually a percentage of the loan and is sometimes referred to as "points." One point is equal to one percent of the amount you borrow. Be sure to get the amount of the fee in writing before you take the loan.

Advantages: A second mortgage offers a tax deductible loan with no equity required. Financing is available up to 125% of value. A second mortgage does not require you to have equity in your home, with loans up to 125% of the value. Pay off your bills, make home improvements, or receive cash out for any purpose. 

Disadvantages: If you need the money to secure a new home for your self, you would be short or would have to borrow more.