From Yahoo Finance: 2025-03-22 12:08:00

A closed-end second mortgage allows homeowners to borrow against their home’s equity without changing their primary mortgage. It offers a fixed interest rate, lump-sum payment, and predictable monthly installments. Eligibility is based on credit score, home equity, and debt-to-income ratio. Borrowers can typically access up to 85% of their home’s value.

Advantages of a closed-end second mortgage include fixed interest rates, lump-sum funding, and potential tax benefits for home improvements. However, drawbacks include higher interest rates than first mortgages, the risk of foreclosure, a one-time lump sum, and closing costs. Borrowers should consider these factors before choosing this option.

Seeking guidance from a financial advisor can help homeowners evaluate if a closed-end second mortgage fits their financial goals. Advisors can provide insights on alternatives like refinancing or HELOCs. Using SmartAsset’s tool, homeowners can find vetted financial advisors in their area and schedule introductory calls to determine the right match.



Read more at Yahoo Finance: What Is a Closed-End Second Mortgage and How Does It Work?