You can take a second mortgage on your home to obtain the funds to cover the cost of your remodeling project or addition. This can be a good option if you are confident in your ability to repay the loan relatively quickly. You can also accept an adjustable rate mortgage (arm) for this purpose. The adjustable rate will be lower than the rate for a standard mortgage loan. The potential draw-backs of this option are that you are putting your home on the line as security for the loan, you will be making payments and paying interest on two separate loans until the second mortgage is paid, and you could see an increase in your mortgage rate if you choose an adjustable rate loan. Most adjustable rate loans include a cap on the amount the interest can increase in a given period of time. If your second mortgage amount is large, an increase in the interest rate can significantly increase the amount of your monthly payments. If you choose this option, you will want to shop for the best rate and lowest closing costs.


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