If you have faithfully paid your mortgage loan and have built up some equity in the house, you can use the equity as collateral for a second mortgage. Here are some of the instances in which this second mortgage may come in handy:
If You Want To Improve Your Home
Selling a home costs money. Yes, you read that right; you need to invest some money to sell your current home that will, hopefully, net you even more money. Most of the investment is needed for improving the house, while a portion may be used for the closing costs (assuming you have to share the closing costs with the buyer).
The more dilapidated your house is, the more money you need to remodel it to a condition where it can fetch a handsome profit. In most cases, if you don't have some money to remodel your home, you can get it via the second mortgage; this is the case even if you just want to renovate the house without selling it.
You Need a Lot of Money At Once
If you are like many people, then your home is probably the most valuable asset you own. This means that if you needed a lot of money at once, you could sell the home and use the proceeds. However, selling your primary residence is not a good idea, and even if it was, it might not give you a lot of money (and the process may be complicated) if you are still servicing its mortgage. Fortunately, none of those complications will rear their ugly head if you decide to go the second mortgage route. If you need money for, say, further education, you can just apply for the second mortgage and continue living in the house.
You Want to Avoid Private Mortgage Insurance
Private Mortgage Insurance (PMI) is a type of insurance your mortgage lender will require you to hold if you have a conventional home loan; it protects the lender's interests in case you fail to pay your mortgage. In most cases, it is required if the lender considers you a high risk (meaning it stands to lose considerable money if you default)—for example, if your down payment is low.
It's possible to use a second mortgage to avoid PMI. In this case, you can take a second mortgage and use it to shore up your initial deposit so that it is above the required threshold. That way the lender doesn't see you as a high-risk borrower and doesn't insist on a PMI.
Contact a lender to learn more about home mortgages.