Emergency Expenses

Using a Second Mortgage To Pay For Emergency Expenses

Sometimes life throws curve balls at us that are entirely out of our control. Whether you got into an automobile accident, have just been diagnosed with cancer, or recently lost a loved one and need to pay for the funeral, these are all unfortunate situations that nobody wants to be in. Suddenly experiencing a tragedy like this can create extra stress on your finances. On top of all the heartache you may be feeling, now you have to deal with the financial stress of figuring out how to pay for all this.

Well, to help alleviate some stress, our team of experts at Lotus Loans & Mortgages have explained how you can use a second mortgage on your home to pay for emergency expenses.

What Is A Second Mortgage?

A second mortgage is another loan taken out on your house, in addition to the first mortgage you already have. With a second mortgage, your house is put up as collateral and you can borrow against the value of your home by tapping into your home equity.

Equity is the difference between your loan balance and the home’s total value. You can increase your equity in one of two ways. The first being every time you pay towards your mortgage you are decreasing your balance and increasing your equity. The second way you can have an increase in equity is by the value of your home increasing over time. This is known as appreciation. Depending on the type of home and the location in which you live, your home will most likely appreciate over time.

So, don’t stress about not being able to pay for emergency expenses. If you have been in your home for a while and make consistent payments every month, you should have enough equity in your home and a good credit score to approve you for a Brampton second mortgage.

Common Uses For a Second Mortgage

The purpose of a second mortgage is to take out an additional loan on a home by tapping into the borrower’s equity. All you need is to make sure you have enough equity in your home, which can accrue every time you make a payment towards your first mortgage.

Getting approved for a second mortgage can be used for multiple different purposes. To help give you a better understanding, our team at Lotus Loans & Mortgages have listed the five most common uses for a second mortgage.

#1: More Real Estate

Some homeowners take out a second mortgage to purchase more real estate. The money you receive from this loan can be used to purchase a nice vacation home out by the lake. Or if you wish to have an additional source of income, you can use this loan to purchase an investment property that you put up for rent.

#2: Consolidate Loans

A second mortgage can also be used to consolidate loans and pay off high-interest loans. If you have a lot of credit card debt you can take out a second mortgage that has lower interest rates than most credit card companies, and use this to pay off any outstanding balances. A second mortgage can also consolidate your existing debt into one payment so you do not have to worry about paying multiple companies at different times every month.

#3: Fund Education

With interest rates on student loans incredibly high, it is financially in your best interest to take out a second mortgage to fund yours or your family’s education. You can also use a second mortgage to pay off any existing student loans.

#4: Home Improvement

If you have been wanting to update your home for a long time but have not had the funds to do so, you can obtain a second mortgage to pay for your home renovations. This is an excellent way to give your home a more modern look or to update those kitchen countertops you have been wanting to do for years.

#5: Vacation

Using the money from your second mortgage does not have to be used for anything home related. You could use the money borrowed to pay for a dream vacation for you and your family.