When homeowners need extra cash to pay off debt or start a home improvement project, they usually consider their home equity options. They can either obtain a second mortgage loan, which offers upfront cash, or they can apply for a home equity line of credit.

Some people choose a second mortgage loan. These offer a low-fixed rate, and monthly payments are predictable. Still, there’s a downside.
 
1. Increases monthly debt load. If you don’t use a second mortgage loan to consolidate debts, you’ll add a new monthly expense and increase your total debt amount.

2. Put your house at risk for foreclosure. Since a second mortgage loan uses your home’s equity as collateral, if you fail to repay the loan, the lender can foreclose your home. This is a huge risk, and everyone who contemplates a home equity loan ought to seriously consider the risks. If you doubt your ability to afford this new payment, don’t apply for the loan.

3. Home value can depreciate. If your property begins to lose value, a second mortgage loan can result in owing more than your home is worth.