How to Pay Off a Second Mortgage
Whether you have a one-time home equity loan or a home equity line of credit, you have a second mortgage that puts your house in danger if you should default, according to Bankrate.com. Home equity loans usually run for a shorter period of time than first mortgages, and you usually pay more in interest than for a first mortgage. Save money on interest and keep your home safe by paying off that second mortgage.
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Instructions
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Pick the correct time to pay off your second mortgage. Jane Bryant Quinn, in "Making the Most of Your Money Now," says you should inventory your debts. Make a list showing lender, amount and interest rate. She recommends paying off higher-interest debts first. Make sure you budget enough to pay the minimum on your mortgages and other debts.
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Locate money to make a lump sum payment when you have decided to put extra money on your second mortgage. Take money out of savings or other low-interest accounts or sell off some investments. If your second mortgage is small, you may find enough cash to pay it off entirely.
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Find a surplus in your budget to make an extra payment every month. Ric Edelman, in "The Truth About Money," says you can consider nearly all your expenses expendable, including new clothing, expensive coffee to-go, restaurants and entertainment. You can pick your own level of sacrifice, but the more you cut back, the faster you will pay off your loan.
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Put your windfall money on the second mortgage. Take advantage of special windfalls to pay down the second mortgage. Put all or part of your tax refund or bonus toward loan payoff. Your sacrifice in the short run will help you pay off the second mortgage faster. Then you will have more money for future fun and investment.
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Tips & Warnings
Quinn says you should not take money out of your retirement accounts for debt repayment.
Make sure you have enough available funds for an emergency.
References
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