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A 2nd bond is usually taken out for repairs or upgrades needed for the home. You can use a 2nd bond for anything you want. Some people use their 2nd bond to pay off higher interest debt or even to pay for their children’s college education.

A 2nd bond is used against the equity in the property you have already created. You have to be careful when taking this investment money out. You lose the equity on the home and will also have to pay an interest rate on it. It is best to use the equity to build more equity in the property. Adding on a room addition or repairing a roof would be considered a good reason for a 2nd bond. Taking a vacation or buying a new car would be considered a bad reason for taking out a 2nd bond.

When people buy a property, either as a first time buyer or even for the second time or the third, they generally need a bond to do so. It is unusual for someone to have sufficient financial resources to buy a property outright. Banks are in business to lend money, and they enjoy lending money for bond financing. The reason being that they know that their money is safe, usually because they hold the deeds for the property and that they have insisted that their client hold a personal equity on the property representing at least 20% of its value, and preferably 30%.