Second mortgage popularity increases

Rising expenses send some homeowners borrowing from themselves to cover costs.

But are borrowers burrowing in over their heads?

Mortgage broker Teresa Simmons says the rising popularity of the second mortgage stems from customers clinging to rates they locked in when they capitalized on their first mortgages.

"The second mortgage product is probably going to become more active in the marketplace because people aren`t going to be so willing to give up those fives, nor should they be, to get additional money and access the equity in their home," Simmons says. "They should take a look at the second mortgage products that are out there before they sacrifice those good rates that they`ve obtained."

Working in the mortgage business, Simmons knows and trusts the safeguards her industry provides.

"Lenders look at second mortgage applications with more scrutiny than they do the first mortgage applications," says Simmons.

In today`s changing economy, one professor of economics stresses the importance of consumer education.

"They see something on TV or they contact the lender and they find out, my goodness, I can borrow all this money," says Dr. Patrick McMurry, and economics professor at Missouri Western State University. "It`s kind of like cha-ching, look at all the things we can do, but now that`s an asset they`ve paid for."

Simmons sees the lower-interest home equity loan as a better alternative to a higher-interest credit card.

"You`re looking at 15-to-30 years payment on a credit card with a balance of $20,000 if you`re just making that minimum payment," Simmons says.

"A professor used to tell me, `you can pay me know or pay me later`," McMurry says. "If you`re talking to a credit card company, the payment later`s going to be a heck of a lot more, perhaps than you think it`s going to be."

Experts agree you need to make sure the numbers work in your favor rather than stack up against you.

A recent report from the federal reserve indicates a sharp rise in housing values in the past decade. They say that rise has led to a buildup in mortgage debt.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.