If you own your own home and need some extra cash, you might want to think about getting a second mortgage. If the value of your house now is more than what you paid for it (the total of your mortgage), you have equity and can borrow more money. This is basically a loan that is backed by your house. It is sometimes called a "further advance."
Finding Another Lender?
You can get a second mortgage from your current lender or look around for a lower interest rate. Most likely, your second mortgage will be for a smaller amount of money, but the interest rates and possible fees will be higher. This is because it's a bigger risk for the lender. The lender takes a "second charge" on your property, which means that if the debt was called in and your house was taken away, they would get their money after your main lender.
What's the point?
Secured loans and second mortgages are popular ways to get extra cash, like if you want to make improvements to your home or start a business but need money to get started. Even though it can be a good way to get a lump sum of cash quickly, you should be aware that you are taking away from what your property should be: an investment. You should make sure you've thought about how much more it will cost to make payments than what you agreed to at first. Will you be able to keep up with the payments if the mortgage term lasts until you retire?
"Understanding the Fine Print"
There are many lenders who offer second mortgages, but before you choose one, you should be sure you understand all of the terms. Even if there is a special offer or a low-interest period, it often goes back to a higher rate after the set time. Again, you need to think about the long term and not just the short term. Also, your equity can give you a safety cushion so that if market prices go down, you won't have to worry about the "negative equity gap." If you get a second mortgage, you will lose this safety feature. (This is a good time to use the phrase "mortgaged up to the eyeballs.")
You should also think about any other fees you might have to pay, like arrangement fees, a revaluation survey, extra payment protection, etc.
