When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Should I Get a Second Mortgage?
A second mortgage, also known as a home equity loan, is a mortgage that is secured against your property. Second mortgages in KC are primarily used when you need a lot of cash to cover an expense like home repairs. Just like when you applied for your first mortgage in KC, you must be able to finance it. You may not be able to get a second mortgage in KC if you have:
Pros of a Second Mortgage
If you are able to obtain a second mortgage in KC, you can use the extra money for:
Not only are some home improvements tax deductible, but they can also bring up the value of your home. The cost can vary based on the condition of the home and what is being improved. Usually whatever you improve, it will be worth it in the long run.
Avoiding Private Mortgage Insurance
Cons of a Second Mortgage
While the pros of a second mortgage are great, it has its disadvantages too. Namely:
If you don’t pay back the loan, you can lose your home. In addition, since this second loan is second in priority to your main loan, fees and rates will be higher. The closing costs of a second mortgage are usually 3-6 percent of the loan amount. Compare that to about 2-5 percent for a main loan.
Also, only use the funds you get from a second mortgage on big payments like home improvements. Don’t use it on luxury items like a vacation. You don’t want to risk losing your home because you used the money on frivolities.