When you want to save money, one of the ways you may be able to do that is through a second mortgage. While it could seem counter-intuitive to take out a loan to save money, there are scenarios where that can be a great benefit. If you do decide to consider a second mortgage, though, one of the things you’ll want to do is be sure that you understand the value you’re getting and the amount of money you’ll be saving, against any downsides to having the mortgage. Saving money is generally always a good thing, but if it comes at a price you have to decide whether that price is worth it or whether it would be better to make a different choice. While you’re considering your options, here are five ways a second mortgage can save you money.
1). What other debt can you pay off?
One of the biggest money-saving reasons to take out a second mortgage is to pay off other forms of debt that have much higher interest rates. For example, if you have $20,000 in credit card debt that you’re paying an average of 14% interest on, and you take out a second mortgage at 4% to pay off that debt, there’s a significant level of savings to be had there. Yes, there will be some fees for the second mortgage, but those will not be as much as the extra interest you would have to pay on the credit cards over time, especially if you’re just making the minimum payments. Unless you can pay off your high-interest debt quite quickly, it’s better to find a way to pay it off with a low-interest loan. A second mortgage can give you that option, and help you reduce your debt level.
2). Will you get a good rate?
By taking out a mortgage, you put your house up as collateral. That’s always a little scary, but if you do it carefully and with planning you won’t have as much risk. You’ll also get a much lower rate of interest in many cases than you would have with other debt. That can help with paying things off, but it can also help you use that money to do things you want to do. Rather than put some home improvement items on the credit card, you can use the money from the second mortgage. You can also pay a contractor to fix some problems, or you can have a pool put in or the yard re-landscaped so it looks great. There are so many options for what you can do with the money you got when you took out a second mortgage, and you will be paying it back at a very low rate of interest so you can get a lot of benefit from everything that money will allow you to complete.
3). Can you reduce your bills?
Reducing your bills can also help you save money. If you have a lot of bills going out for household things and for the debts you have to pay, you can find that pretty soon it’s easy to overlook something. Then you end up with late fees and other charges, which can be frustrating and expensive. Rather than have that happen again, you can use the money you got from taking out a second mortgage to pay off your other debt. That way you won’t have any other bills except for those that are required for your household, like electric and water. Those bills are much easier to keep up with, and having fewer bills to keep track of every month will reduce the chance that something will get missed or that there won’t be enough money in that particular account to cover the bills that are supposed to be paid from it.
4). How does a second mortgage reduce fees?
If you’re thinking about getting a new mortgage on your home, consider those mentioned late fees and related charges. They just keep adding up, and before you know it they’re really amounted to something. They can also hurt your credit score, because paying things late is a problem if it gets reported to the credit bureau. Rather than end up with a bunch of fees and some credit problems to go along with them, let your second mortgage put some money in the bank account. That will help ensure that the fees and charges that may be getting started can be stopped before they get worse. It’s a good feeling not to have to worry about that anymore.
5). How does a second mortgage keep money in your bank account?
If you decide that taking out a second mortgage is for you, you’ll want to find out about the rate and terms before you agree to anything. But you’ll also want to consider how taking out a second mortgage can work for you. If you have investments that are doing well, but you need money for something else, a second mortgage can be the right choice. As long as the rate of interest on your second mortgage is less than the rate of interest your investments are bringing in, you’re actually keeping more money in the bank by taking out a loan to do the things you want. It’s a great way to keep your money working for you and still do all the other things that you feel are important.
2 Point Highlight
When you want to save money, one of the ways you may be able to do that is through a second mortgage.
If you decide that taking out a second mortgage is for you, you’ll want to find out about the rate and terms before you agree to anything.
