Taking A Second Mortgage – Yes Or No

take a second mortgage or not

Many homeowners consider taking a mortgage as the best solution to find money for other things they need to invest in. Sometimes they take the mortgage to buy the house they live in. Some other times, they need money for an emergency, so they see themselves forced to mortgage their home. Either way, life circumstances can bring these people in front of another dilemma: whether to take a second mortgage or not.

As strange as it may sound, a mortgage modification isn’t always a good idea, so you need to analyze the situation very carefully in order to determine whether a loan modification would make things better or not. Sometimes, filing for bankruptcy could be a better solution. You’d still be in financial trouble, but at least you’d be better off in the big scheme of things. You need to assess very carefully what amount of your loan you can wipe off in each situation, and then go for the one that looks better. In addition, a second mortgage may come with lots of taxes on top, as you may need to report a certain amount to the IRS on Form 1099-C. If you don’t qualify for an exclusion, you are going to need to pay taxes on this income. You need to take them into consideration when you do your math in order to see whether to take the second loan or not. On the contrary, debts discharged in bankruptcy aren’t taxable, so this could be a better solution in some situations.second mortgage

The best thing to do when in doubt is to speak to your attorney or financial adviser before taking any decision. Your lender may try to tempt you to modify your loan, but it’s only after a careful examination of all terms and conditions that you can give an informed answer. Your main purpose is to relieve your financial burden at least partially, otherwise you are going to sink even deeper. Personal finance management is a skill that needs time to learn, so don’t be ashamed to ask for advice from the specialists. Their role is to help you and other people in your situation figure out a strategy to give them back their financial independence. Debt relief is a dream for many, but unfortunately it becomes real for only a few. The main reason is that most people take impulse decisions when it comes to loans, mortgages and other debt forms. They rush into taking the first decision that seems to enlighten their life a little, forgetting that on long-term they may have to pay a price they can’t really afford. If you want to be smart, don’t let yourself attracted into your lender’s cob, but rather assess the pros and cons of taking that loan before saying yes or no. If it comes out that you should refrain from taking this mortgage, you should proceed accordingly, no matter how hard it may seem. You’ll be happy you’ve taken the right route later on.