We all know that we can take a second mortgage for up to the amount of equity weve built in our home loan with our payments, but when is it a good idea to do that? Is it a good thing or a bad thing? Should we use that money or leave it alone? The answer is the same as the answer to most complicated questions like this, especially those having to do with financial choices: it depends.

It depends on many factors:

How much will you pay to borrow against your home equity? Will you pay points again? How long will you have to repay the loan? At what interest rate? Should you borrow the full amount? Or less? How will the money be used?

Second home loans can be a double-edged sword. On the one hand, its your equity and you can re-borrow it if it is worth the cost to you. On the other hand, what if something changes? For example, your home loses value and you find yourself in debt for more than the value of the home? It can happen. Or, you borrow the money to invest it and the investment loses money and you are left with no profit and no equity, either?

Many people who are considering taking a second home loan are doing so to pay off higher interest debts or because theyve lost a job or other source of income and need the money. It may feel like its your only choice. Is it? Be sure to check the cost of your options before you use your home equity for a second mortgage.

Ideally, you will want to get financial advice from a debt counselor or banker or financial planner. These professionals can help you to compare your choices and evaluate the risks of taking a second home loan. It may be helpful and they can help you avoid any potential headaches.