Stand Alone 2nd Mortgage

| November 5, 2011

What A Stand Alone 2nd Mortgage Is And Why People Make Use Of This

A stand alone 2nd mortgage is when you take up a second mortgage loan on your existing property which is registered on its own, in other words it isn’t added to your first mortgage. The banks will normally only grant a 2nd mortgage when you have built up equity on your property, in other words if the outstanding amount of any current bond is less than the market value of the property. You will of course have to pay legal and bond registration costs again.

The reasons why people make use of 2nd mortgages are manifold. One important reason is to settle other bonds or debt. If you have an existing mortgage and you can get a second mortgage at a much lower interest rate, you could use the money to settle your primary bond. You could also use it to settle credit card debt or personal loans.

In the current economic climate many people have lost faith in their pension funds. They would much rather own a piece of real estate than rely on a pension fund to provide for their old age. If you’ve had your property for a long time and the bond is relatively small compared to the market value of the house, you could easily take up a second mortgage and use the money to buy e. G. An apartment.

Another possible use for a second mortgage is to use the money for a rental property. With this solution you can use the rental income from the property to cover the monthly repayments on the bond. Eventually you will end up with a fully paid up house or apartment which didn’t cost you much of your own money.

A further option is to use the funds to buy a holiday home. Not only is this an excellent long term investment, but it also provides a way for you and your family to get away from the stresses of everyday life. You can also create income by renting out the property while you are not there.

A second mortgage can also provide you with the necessary funds to pay for your children’s education. If you have enough equity on your current house (see above) the amount that you can borrow could be enough to cover both the cost of their education as well as to buy an apartment near the university where they can stay during their studies. Once all your children are finished with university, you can sell the apartment again at a nice profit.

If you like traveling, but you don’t like the idea of owning a holiday home in one particular spot, why not use the funds from your 2nd mortgage to invest in time share? There are many options available nowadays, whereby you could for example spend a couple of weeks every year in different locations around the world. There is also a secondary market in time share, so you could sell your timeshare to someone else at a later stage.

A stand alone 2nd mortgage can therefore be a vehicle to get rid of other debt and also to create new investment opportunities. Why wait, therefore, to enjoy the equity you have built up on your house until you’re too old to enjoy it? Just make sure that you can afford the monthly repayments!

Category: Home Loan

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