The term second mortgage has some kinds of negative connotations. It is often believed that people who have extreme financial difficulties and poor management skills only qualify for a second mortgage. This perception has now changed for many reasons. The housing prices have gone very high at the extreme levels. Fuel prices are rising higher and many people are facing extreme financial difficulties when they don’t have any other alternatives without a car or for home heating purposes. Even food prices have also rose substantially over the past couple of years.
There would not have been too much problems with the rising prices if the income sources had also been increasing at the same pace. There’s still unemployment all around, unexpected job loss, and most of the families finding too hard to make ends meet even with members making “good” salaries. To relieve some of the financial worries, second mortgage can be a good strategy for getting one’s financial house in order.
How does debt consolidation work: Due to the present economic crisis, many people are overwhelmed with their existing credit card debts, besides a monthly mortgage payment, car payment on which they cannot default otherwise those assets will come at risk. Keeping a track of all these payments can be sometimes problematic.
Debt consolidation will combine all your existing loans, credit cards, mortgages under one monthly payments and pay at lower interest rates. Many credit card companies are offering some kinds of consolidation programs to their customers going through extreme financial hardship. They will offer a time limited low interest rate when you transfer all the balances of other credit cards to their credit card. They are offering these options so that you get to combine all your bills under one monthly payment and save some money in interests. If you have to pay to high interest rates to multiple credit card companies, then you are not able to save anything because a lot of your hard earned money is eaten up right there.
Although this consolidation program by the credit card company definitely helps, but you are getting a lower interest rate for a certain period of time only. If you have to utilize the low interest rate offer, then you should have some money to get the debts paid off within the offer period. Otherwise they will charge you some kinds of annual fees and high interest rates that will erode your entire savings.
A second mortgage will provide you with the money you need at interest rates more in line with standard mortgage rates. Imagine paying 6% interest instead of the 12%-18% that banks typically charge for a credit card.
How does a second mortgage work: Based on the equity in your home, you get a second mortgage by the mortgage company. Equity is the difference between your current mortgage debt and the current appraised value of your home. Let’s say you have $35,000 equity in your home, you can easily borrow that amount from the mortgage company and pay off some or all the existing debts. This will save a lot of money just in interests and fees charged by the credit card companies. Speak to your mortgage professional and financial advisor to learn more on Loans, Credit Cards, Mortgages consolidation programs.