Trulia San F…, Other/Just Looking in San Francisco, CA

Are there downsides to a second mortgage beyond the higher interest rate?

Asked by Trulia San Francisco, San Francisco, CA Tue Mar 26, 2013

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Helen Yuen, Agent, Oakland Ca 94605, CA
Wed Mar 27, 2013
Even though the interest rate may be tax deductible,
it's not a good a idea to accumulate more debt if not necessary.

Pay off most of your debt, have a great fico score and you are in a good position.
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Jackie Cuneo,…, , San Francisco, CA
Tue Mar 26, 2013
This is the wrong question--the question should be, what is the reason you are considering a second mortgage?
1. Most seconds are put in place instead of having a higher first loan with mortgage insurance.
2. Many times the payment on the 2nd loan is actually less than the mortgage insurance payment would have been.
3. Many seconds are HELOC products, which can be paid down and reborrowed on later at a rate lower than most credit cards, and used for things like home improvements.
4. Often the interest on a 2nd mortgage is tax deductible (check with your cpa to confirm)
5. The primary reason clients will use a second mortgage is to purchase property with a lower downpayment. This allows them to become homeowners sooner, benefit from current low interest rates on the first loan, and start benefitting from the home interest tax benefits.
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