A second mortgage could help you get out of debt

If you own your home, there is simply no reason to continue to struggle to make your financial obligations each month. Granted, it is hard to think of solutions when all you can think about is where you are going to get the money to pay all of your bills on time. But the solution can be as simple as combining your debts through a second mortgage.

It may sound absurd to get out of debt by accumulating more debt, but if a debt management plan is used properly, a second mortgage can change your financial picture instantly. Another way to look at taking out a second mortgage is by calling it a debt consolidation loan.

By cashing in on the equity you have accumulated in your home and using it to consolidate all of your debt, you could end up saving hundreds of dollars each and every month and saving thousands that would have otherwise been spent in interest under your current credit agreements.

Here’s how it works: When you consolidate your debts, you bypass a great deal of the interest charges that you would pay if you kept making only your minimum monthly payments over the course of the agreement. Just think of how much interest you would pay in a year if you had a credit card with a balance of $2,000 at 29 percent interest. That interest is almost $50 per month. And that’s just one debt. Imagine if you had three or more debts just like this one.

Add to that the fact that most credit card companies only charge 1 percent of the principle balance on your minimum monthly payment each month, and you could be paying interest for decades before you see your $2,000 balance paid off. This would cost you thousands in wasted interest payments.

A second mortgage pays off those balances and finances them for you under a much lower interest rate. That means that more of your money goes toward the principle balance and you get out of debt quicker.

So, if you own your home, there is no reason not to take advantage of the equity that you have earned. Stop putting money into creditors’ pockets and start keeping it in your own.

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