During the mortgage crisis, second mortgages got a bad rap. During the heyday of the housing boom, borrowers were finding it relatively easy to get into the home of their dreams without a single dollar sown. They were using second mortgages on top of the first mortgage to get in the door and no one was particularly worried about it all because home prices were sure to stay on the rise.

But then the bottom fell out. The housing process fell drastically and those with adjustable-rate mortgages found themselves unable to afford the higher payments each month. Since many homeowners were underwater on the mortgage, owning more than their homes were worth, refinancing the loans was not a possibility. Government assistance programs were also an unusable option because most only help out with first mortgages.

When Second Mortgages Make Sense

As homeowners today are more knowledgeable about the risks of the housing industry and many have gone through mountains of red tape saving their home, few are likely to repeat history. However, a second mortgage is not inherently bad. In fact, when used correctly, a second mortgage can be a positive financial strategy.

Here are three ways a second mortgage can be used effectively to benefit a homeowner:

Improve The Value of a Home

Investing money into your home is a sure-fire way to increase your money. Smart renovations including kitchen and bathrooms will increase the value of your home and when it is time to sell, you will receive a large percentage of your investment back. Plus you have the incentive to enjoy the remodeling during the time you remain in your home.

Save For College

With tuition rates averaging up to $35,000 a year currently, the cost of a college education in the future might be more than you can reasonably afford even with a substantial savings account. A second mortgage can help fill in the gaps between your savings, scholarships, and financial aid for the expenses of your college student over the course of four years.

Launch a Business

Improving your financial future is one of the greatest investments you can make. Investing in yourself will not only set you up financially for the future, it can improve your life immensely. If you have been moved by the entrepreneurial spirit, a second mortgage can help you start a new business. Entrepreneurial endeavors will need financing and most lenders will shy away from small business loans without substantial proof of success. Additionally, if you were to secure a loan for a business, you’d pay much higher rates than a home equity loan might offer.

Home equity is a great resource for other options as well but be very wary of your motives for taking out a second mortgage. Be sure you are in a financial position that guarantees your ability to pay back the loan on time each month. Many homeowners have made a mistake in taking out a second mortgage to pay off debts only to find they couldn’t afford the second mortgage note. Defaulting on the loan may put you at risk for losing your home so carefully consider your motives and have a plan that outlines your ability to pay back the loan and protect your assets.