Pro: Interest Rates

• The interest rate on a second mortgage can be more favorable than that for credit cards or loans. The rate on a second mortgage may be fixed, unlike the variable rates available with credit cards. A fixed rate allows the homeowner to plan how much will be paid out on the loan each year. Lenders offer better rates on a second mortgage because the home backs the loan and a bank can take ownership of the home if the homeowner fails to keep up with the payments.
  
  

Pro: Tax-Deductible

• The interest on a second mortgage is tax-deductible, while the interest paid on a credit card is not. Homeowners can deduct up to $100,000 of the interest paid.
  
  

Con: Debt

• The lower interest rates available on a second mortgage can cause some homeowners to borrow more than they really need. The easy availability of cash in home equity can cause some to become mired in debt, which can strain the family budget. To use a second mortgage effectively, the homeowner must be disciplined enough to borrow only what is necessary and stay out of debt as much as possible.
  
  

Con: Decreased Home Value

• A second mortgage is a financial advantage as long as the value of the home increases. When the housing market plunges, the home can become valued less than the amount owed on it. This is called being underwater. If the home must be sold, homeowners may not be able to recover enough money to cover the mortgage.