Why Getting a Second Mortgage is a Bad Idea
What's a second mortgage?
Assuming you have equity in your property, many companies will give you a second mortgage, usually up to 60-70% of your equity. Interest rates vary, but could be as high as 18%. What's worst is the fees they charge, they are exorbitant. Be sure to read the fine print and understand how much you'll be charged for different reasons.
Second mortgage setups are typically dressed-up scams
The primary reason is that these loans are typically scams which are designed to make it easy for you to default so the company can repossess your home. With their high rates, sky high fees, and litany of hard to decipher rules and regulations, they are a time bomb to foreclosure.
You're risking your home
Second mortgages are designed such that the bank will end up owning your home if you fail to to repay. This is the worst possible outcome. You had better be sure that you'll be able to repay this loan, or else you will certainly lose your home.
The fine print of any second mortgage will contain a thorny nest of procedures, rules, and additional services which you will be required to pay for. Read them carefully and chart out exactly how much you're going to pay for all these additional services and fees over the life of the loan. Also, be realistic about the total time you'll need to carry the load, it's easy to underestimate this. In light of these fees, an underestimation can cost you your home.
Unfairly high rates
Second mortgages are designed for borrowers in distress, and thus will carry far higher feeds than your regular mortgage. You should compare these rates against other options such as personal loans and credit cards, as they might be equivalent if not tipping in favor of other sources.
The bottom line is, you should avoid a second mortgage unless you are confident that the use of the funds will enable you to get yourself out of your foreclosure situation.