Second Mortgage Loans for Home Improvements
Many people need to make home improvements, but don't have the large lump sum of cash available at their fingertips. Because of fluctuating market cycles, selling off stock may not be a wise strategy. Not only will you pay commissions and capital gains taxes on your stock investment proceeds and profits, you might critically impact your retirement savings. Credit card borrowing doesn't usually offer enough cash for home improvements. Even if it did, the terms and rates for credit card loans are exorbitant and risky. What's a homeowner to do? A second mortgage home loan might be just what the financial advisor ordered. It can be a prudent choice, with some tantalizing tax benefits to boot.
Probing the Process for the Second Mortgage
With any mortgage-first or second-the process is essentially the same. You'll be asked to document your income and credit history, and then pay closing costs for things such as appraisals, attorney's fees, and loan origination fees. Because second mortgages are more carefully scrutinized than first mortgages, (to ensure that you have the ability to pay them both back), you can expect to pay slightly higher interest rates and fees; but many of those costs are also tax deductible.
Determine how much money you need to accomplish your home improvement needs by getting written estimates from two or three reputable construction contractors. Add 10-20 percent for unexpected overages, because construction projects often run over budget. Then, approach your lender with your plan, and find out what kind of terms you can get for a second mortgage. Shop around and compare rates; but don't be surprised if the company that gave you a first mortgage offers the best deal. They have a working relationship with you already and are more familiar with your payment habits and financial situation. To them, you represent a good repeat customer instead of a first-time risk.
The great thing about borrowing a significant sum of money through a second mortgage is that you can repay it a little at a time, with a fixed payment schedule, over several years. Other loans require faster payoffs, have fluctuating and volatile interest rates, and don't come with any noteworthy tax benefits. And, as you add value to your home, your ability to borrow increases. Whether you use that equity or not, it still adds to your personal net worth in ways that earn respect in the eyes of your banker.
Source: http://www.mortgageloan.com/second-mortgage-loans-for-home-improvements-507
Home Equity Hiding in Your House - Your Greatest Asset
By Michael Benifez
One of the most valuable assets you may have is not your stocks and bonds and your diamonds, but your home. If you are like many individuals, you are not aware of the hidden value of the equity in your home. There are many ways to use this equity. We can only talk about a few of the most popular ones.
You can take out a home equity line of credit and use it for just about any purpose you can imagine-an addition to your home, start up a new business, fund a retirement plan, make investments, or consolidate your debt. The latter is one of the most popular uses for home equity debt. Using the equity in your home, you can eliminate debt that is at high interest rates by paying it off with the proceeds of your home equity line of credit. Besides saving money on interest, you may also receive a tax deduction when you file you taxes.
If you are not aware of these possibilities, it is time to learn about taking out a second mortgage, a home equity line of credit or re-financing your current mortgage. Some people may be afraid to risk such a valuable asset as their home and they do not take advantage of these things because they are afraid they will lose their homes. However, if you inform yourself about how these things work, you can take advantage of them to be able to do things you dream of, such as add a room onto your home or just make an existing room larger.
If you have thought about how you could possibly use the equity in your home, there are many ways this can be done. The possibilities about how to use these funds are as varied as the people who decide to use them. What is the most valuable use for you? Perhaps you should talk to your tax accountant or financial advisor to decide what is right in your circumstances.
As we said, you can take out a home equity line of credit, a second mortgage or you can re-finance your current mortgage. A home equity line of credit is the amount your bank can set aside for you that is the difference between the equity in your home and the amount you currently owe on it. This kind of line usually has a variable rate of interest, or it may be adjusted periodically based on the prime rate. If you have an appraisal that is fairly new, say less than five years old, the bank will probably let you use that to determine the value in the house.
A new mortgage re-finance will be a bit more complicated, since a new appraisal is required and a new note is established. Because of this extra work, many homeowners avoid them, but they are really a good idea since the rates on a second mortgage are better than on an equity line of credit, and they are usually fixed, so you won't get hit with high interest over time.
A second mortgage is closer to a home equity line of credit in that it taps the difference between the existing home loan and the market value of the home. Like the home equity line of credit, there is not usually a need for an appraisal, title search or closing fees.
But the tax benefit exists with all of these options. Any mortgage interest paid, up to the value of the home, is tax deductible on your income tax. Even if you have used the funds for something other than your home, you can take the tax deduction, as long as the total loans are not greater than the total equity in the home.
So what can you use these new found funds for? You can think of almost anything to use them for. One of the most common uses, as we discussed, is home expansion or home improvement. But education costs for you or your children, business startup costs,and many other uses can be found. No matter what you use the funds for, you will find that using the equity in your home for your financial needs is a great idea. You may find that after a number of years of making payments on your mortgage you have built up a nice equity in your home that you can take advantage of instead of having the value of it just sit there.
Source: http://ezinearticles.com/?Home-Equity-Hiding-in-Your-House---Your-Greatest-Asset&id=415330
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