Should You Take Out a Second Mortgage? 3 Essential Questions To Ask Yourself

Are you a proud home owner? That means you're the proud owner of a home mortgage too!

A home mortgage is your monthly payment toward the house. It's kind of like paying rent each month but you own the house, which makes it all worth it.
With a second mortgage, you borrow your house's equity in order to pay off other debts or complete home improvement projects. Have you considered taking out a second mortgage on your home?

Find out if that decision is right for you. Keep reading to learn the three essential questions to ask yourself before taking out a second mortgage.

1. Can I Afford the Additional Debt?
First of all, you must take an honest look at your finances and consider if you can afford a second mortgage. Sure, it's money for your project. But it also costs money!
Before you receive a second mortgage, you have to pay to get your house appraised. That's a few hundred dollars right there.

You also pay loan origination fees and legal fees attached to the process. The money you owe is stacking up now!

Not only that, but a second mortgage is still a debt, even if you're using it to pay off another debt. You have to make your full payments on time. Otherwise you'll find yourself in more financial trouble than before.

2. Is the Additional Debt Worth It?
What is it exactly that you're taking out a second mortgage for? Is it something like desperately-needed home improvements (like gutting the bathroom to get rid of mold) or is it more along the lines of building a pool?

You can get approved for the loan either way, but that doesn't mean you should take it. Ask yourself: is what I'd be going further into debt for worth the additional debt?

Is your pool worth all the fees, the process, the debt, the commitment? What if it's for your child's college education? If you do think it's worth it, check out OctaFX review to compare brokers.

3. Do I Understand the Tax Implications?
When you take out a home mortgage, the interest you pay is tax deductible. Just like you can write off charitable donations, you can get tax deductions for paying a home mortgage (as long as the amount meets your state's requirement).

For a second home mortgage, things are a little more strict. You can get tax deductions depending on what the money is for. For example, you cannot deduct the tax interest amount if the money went toward other debts, your business, or a vacation.

So if you're counting on affording the additional debt by deducting the interest, think again. It totally depends on your plans for the money.

Is Taking Out a Second Mortgage Right For You?
You may be looking to renovate your kitchen. Or maybe to finally finish that basement project you've been meaning to get to since you moved in.

You may have other debts or upcoming expenses, like a child's wedding, a baby coming, or a spouse's education. You can use the money from a second mortgage for any of these things. The question is, is it right for you in your situation?

Be sure to ask yourself these three essential questions before you make any big decisions regarding your home. And check out our helpful site that teaches you all the terms and words you need to know to make informed decisions!