Article by Josh Spaulding

A second mortgage, or a home equity loan, is a good option if you’ve got climbing debt and some equity built up in your home. Taking out a home equity loan or a home equity line of credit may be a viable solution for you, but only if you find the right second mortgage interest rate.

You can use the funds from your second mortgage or line or credit in order to pay off debt, do home renovations or consolidate your bills. However, if you’re using it to pay off debt and you don’t do anything to adjust the way that you have been spending money then you’ll end up overspent again in just a few years. Don’t think of a second mortgage as a band-aid to a bad spending habit. Take out the second mortgage but also start using a family budget and control frivolous spending.

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The interest rates on Second Mortgages are typically higher than those of First Mortgages. This is primarily due to the increased risk for the Second Mortgage Lender.

Simply, in the event of default, the Second Mortgage holder would only recover his funds from the proceeds after the First Mortgage was satisfied. In addition to the First Mortgage any Municipal Taxes due, Legal Fees Payable and all Processing costs would have to be paid as well, before the Second Mortgage lender would receive any funds to satisfy the Second Mortgage. In some cases of default the Second Mortgage lender may choose to assume the First Mortgage to protect his interest in the property. This will be not only time consuming but costly for the Second Mortgage lender.

The Interest rates determined by both Institutional and Private Lenders on Second Mortgages will be based on many underwriting criteria.

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Debt consolidation can be a confusing subject. There are many conflicting views on what a consumer buried in credit card debt should do to get back on their feet. These conflicting views have everything to do with the fact that the best solution is always unique to the individual and if you’re in trouble you should do your homework. What isn’t unique is the problem of credit card abuse.  Let us take a look at second mortgage loans, which are becoming very popular avenues many homeowners are taking for consolidating credit card debt.

Of course the best solution is to avoid getting into credit card debt in the first place. Judge John C. Ninfo II chief judge of the U.S. Bankruptcy Court for the Western district of New York state noted that credit card collectors, “are like the Capital One Vikings. They’ll rape and pillage you anyway they can.” Ninfo explains that most college students leave with $3,000 in credit card debt. This is a great way to begin the spiral of debt. Credit cards have compounding interest and if you only make the minimum payments your debt will compound as well. You may be out of college now, but if you’re credit card debt is out of control you should do something about it, starting with cutting up your credit cards.

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I am looking for data on the average annual interest rate of Home Equity Loans. From 1970-current would be ideal.

Do you know where I can find this data.

Thank you.

Our current home is in Seattle. We will be keeping this home and living in it during the summers, our new home will be in Denver and we will be living in it during the rest of the year.

My husband and I are buying a home. The home we are looking at is about $73,000. We were quoted a 6.25% interest rate for a 30 year note with a monthly payment of $908 (without tti). This seemed quite excessive to me. Coming home and doing the calculations (on bankrate.com’s mortgage calculator), a 30 year note of $73,000 with a 6.25% interest rate should result in a $450 monthly payment. In order to get my monthly payment up to $908, I had to make my interest rate 14.75%. Now, the underwriter said the 6.25% wasn’t the APR. What does that mean? Why would I have two interest rates, and why is one so much higher than the other? If we pay $908 a month, we end up paying $326,000 for a $78,000 home. This seems a little ludicrous to me. Anyone with financial experience got any wisdom to share?
This was just the man who’s selling me the house who will put everything together for the loan application. The total including TTI was $1208.

I live in Massachusetts and bought my first home in 2009. I have soft second loan from a bank. I just recently found out a soft second loan has interest subsidy from government funds, but I don’t have it! No body (including the mortgage person at the bank who prepared my loan, and my lawer) had mentioned anything about this to me. How come I didn’t get it when I applied for the loan? What should I do at this point?