Second mortgage loans have a minimal effect on financial aid, which is the money that is awarded, loaned or paid to the student to assist in the payment of his college education. There are three kinds of financial aid and these are loans, scholarships and grants and work-study employment. Meanwhile, a second mortgage is a kind of loan that is secured by the home of the borrower. It is known as a second mortgage because it is the original mortgage used to purchase the home has precedence over it. The proceeds of this loan can typically be used for anything, including college education.
Let us consider the three types of financial aid and see how a second mortgage loan will affect them.
Scholarships and grants are the type of financial aid that you would normally to try get first because they are given to you for free. They should be your first priority because you are not required to repay them. Grants are provided based on need and second mortgage loans are not in any way related to them because eligibility is based on income and assets. Meanwhile, scholarships are entirely based on academic achievement, religious background, athletic achievement, special talents and skills and cultural background. Therefore, second mortgage loans do not affect scholarships.
Another kind of financial aid is the Work-Study program, which allows the student to work in a job that can be a source of additional income that can help for the payment of college costs. Because the federal government will be reimbursing the school for the salary, total earnings is capped based on the student’s financial need. Once again, a second mortgage loan cannot affect this because it is based on income and assets.
The third type of financial aid is the student loan and should be the last to be considered because it may take the student six to eight years to repay this loan after graduation. Since the second mortgage loan may be used to help in the payment of college education costs, the student and his family must be cautious in deciding the amount of student loan that they should take out.
A second mortgage loan does not necessarily have anything to do with financial aid or affect it in any way. Second mortgages are taken out on a property using the amount of equity the borrower has acquired. Many borrowers take on these loan to help them with other emergencies or other debts such as student loans. Never prioritize your student loan over your second mortgage, because if you fail to repay the mortgage the lender can force the borrower out of their property and foreclose.