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Paying Off a Mortgage with a Second One

The merits of paying off a mortgage in the Beehive State are debatable. If you belong to the group of homeowners who think that life is better without this nagging debt, then do everything in your power to get rid of it ASAP. There are many ways to achieve your goal, but the least explored avenue to enjoying a mortgage-free life is taking a home equity loan in Utah.

A home equity loan is a second mortgage because it allows you to borrow against your house on top of the existing loan you used to buy it. It does not always work, so pay attention to the considerations below to understand this strategy’s viability and implications to your personal life moving forward.

Available Home Equity

The amount you can borrow depends on the outstanding equity you have built on your property over time. Your home equity grows as your house’s value increases, and your mortgage balance decreases. If you pay your home loan more than you should, you can accelerate equity growth at a faster rate.

Even if you make extra mortgage payments consistently, it will still take a lot of time to have enough home equity to pay off your primary home loan. Also, a lender will likely not let you borrow 100% of your home equity, so you might need to use your savings to come up with enough funds to pay off your mortgage early.

Monthly Repayment

two men having a dealYour monthly home equity loan expense depends on the length of its term, so your payment can be lower or higher than what you currently pay your mortgage lender. The size of your monthly payment, however, is not indicative of the money you can save every month. Instead, focus on the interest.

If you could get a lower interest rate than the one attached to your primary mortgage, then taking out a home equity loan might save you money even if it means dealing with higher monthly payment.

Out-of-pocket Expenditure

Home equity loans also come with fees and closing costs. You should consider these upfront charges when doing the math. After all, the interest rate alone does not represent the overall cost of borrowing against your home equity.

Prepayment Penalty

Not all mortgage lenders are happy when their customers pay what they owe ahead of schedule. Prepayment can affect their profit, which is why some of them impose a monetary penalty as a disincentive.

Review your mortgage contract to find out whether you entered an agreement with prepayment penalty to avoid getting blindsided.


Paying off your primary mortgage can lower your FICO scores, for it lowers the average age of all of your credit accounts. A new account will be opened when you take out a home equity loan, potentially making things worse. Although your closed account will still contribute to the “payment history” department, it will disappear from your credit reports after 10 years.

Paying off a mortgage early or on time can have adverse effects on your financial life. If you keep the said considerations in mind, though, you could see whether you should trust your gut and ultimately make the reasonable decision.

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