Your home is one of the greatest assets in your possession. Even if the property is not completely paid for at present, the equity in the home can be put to good use right now. Choosing to take out a second mortgage is one of the ways you can utilize this asset and improve your financial situation. Here are a few examples of how to do just that.
Consolidate Debt
It’s not unusual for homeowners to take out second mortgages as a way to reorganize their debts into a more manageable form. Perhaps you are already carrying a substantial amount of unsecured debt when a medical emergency strikes. Even after your medical coverage takes care of most of the expense, there are open balances that need to be settled. By using the money from a second mortgage to consolidate all those debts into a single obligation, you accomplish several things.
Once the consolidation is complete and the funds are disbursed, no one will be calling and asking when they will get paid. You also don’t have to worry about missing a payment and ending up with a negative comment on your credit reports. In this manner, the second mortgage is helping protect your credit score and financial reputation.
You will also find that this approach saves money. With all those debts settled, they can no longer accumulate interest from month to month. The rate on the mortgage is likely lower than on those unsecured debts. In the long run, that means you will pay less out of pocket.
Add a Room or Two
You love your home, but the needs of a growing family make you wonder if moving to a larger place would be best. Since you are happy in the present home, why not add a room or two? Assuming there is plenty of square footage to add a room to the back or one end of the home, the space issue will be resolved faster and easier.
Remember that along with allowing you to remain living in a house that you love, this approach increases the property’s market value. When the time comes to sell the home in a few decades, the additional space will allow you to ask for and receive a higher asking prices. That means more money in your later years to enjoy being retired.
Renovate Existing Areas of the House
Have you thought about making some updates to the existing structure? For example, how about finishing the basement and the attic so there is more living space? In many instances, that will be a less expensive option that adding rooms to the home.
Renovations also add to the value of your home. Enjoy the extra living space now and use it as a selling point when you do decide to downsize to a smaller place. The additional funds you get from the sale will make it easier to buy another home and still have money left over.
Keep managing your current mortgage responsibly and always make sure you can afford the terms associated with the second mortgage. When utilized properly, you simplify your finances and make life a little easier.
