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Refinancing Your House - How to Know Whether to Refinance or get a Second Mortgage
Refinancing your house's mortgage is not the same thing as getting a second mortgage. While both allow you to cash out your home's equity, terms and rates differ between the two types of loans. To know which financing option is best for you, learn each loan's features and pick the one that best meets your needs.
Refinancing Your Mortgage
Traditional refinancing is basically replacing one mortgage loan with another. Typically, refinancing lowers mortgage payments through lower interest rates or longer loan terms. You can also cash out part or all of your home's equity while refinancing.
Refinancing requires paying closing fees. To recoup these costs, you usually need to stay in the house for a couple of years. However, you will save money with better terms than if you choose a second mortgage.
Second Mortgage Option
Second mortgages, also known as home equity loan, have slightly higher rates than mortgages, but you have less or no closing costs. Second mortgages also only charge interest on the amount you borrow, not the total amount you are approved for. You can take out your equity over the course of several months or years. Terms vary widely between second mortgage lenders, so watch out for balloon payments or repayment fees.
If you want tap into your equity to make some home improvements but plan to sell soon, then a second mortgage would be better than refinancing your mortgage. Second mortgages also are a better choice when your current mortgage interest rate is lower than those being offered by refinancing lenders.
Factors To Consider
When deciding which financing option to choose, consider the purpose of the loan. If you want to reduce monthly payments, then refinance. If you simply want to tap into your home's equity, then apply for a second mortgage.
Also, consider how long you want to stay in your house. You can lose money refinancing your mortgage if you don't stay in your home. However, if you sell your home or refinance, you will have to pay off your second mortgage.
Remember, only you know which loan best fits your financial needs.
To view our recommended sources for refinance mortgage loans online, visit this page: Recommended Refi Mortgage Lenders Online.
Carrie Reeder is the owner ABC Loan Guide, an informational website about various types of loans.
MORE RESOURCES updated Sun. January / 17 / 2021
What are the hidden costs of refinancing a mortgage? Fox Business
3 Mortgage Refinance Strategies to Consider in 2021 The Motley Fool
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now - Fox Business
Mortgage refinance rates continue hitting record lows – here’s how to get the best deal now Fox Business
Thinking of refinancing your mortgage? Do your homework before you jump in. - The Philadelphia Inquirer
Thinking of refinancing your mortgage? Do your homework before you jump in. The Philadelphia Inquirer
I'm retired and won't live to see my mortgage paid off. Should I refinance to lower my monthly payment? - MarketWatch
I'm retired and won't live to see my mortgage paid off. Should I refinance to lower my monthly payment? MarketWatch
What Is A Debt Consolidation Refinance? | Pros And Cons The Mortgage Reports
Can you refinance a mortgage while in forbearance? Fox Business
What is a mortgage prepayment penalty fee, and how does it work? Business Insider
Our Experts' Best Mortgage Advice of 2020 The Motley Fool
Buying a Second Home: What to Do and How Much It Costs Credible News
How to decide if you should refinance your mortgage Fox Business
Mortgage refinance: Everything you need to know Fox Business
How to refinance your mortgage Fox Business
Who's exempt from the new mortgage refinance fee? Fox Business
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 - Forbes
Everything You Should Know About The New Mortgage Refinancing Fee That Goes Into Effect Dec. 1 Forbes
4 ways to get lower mortgage refinance rates Fox Business
Today’s mortgage refinance rates hold steady for third consecutive day | December 11, 2020 - Fox Business
Today’s mortgage refinance rates hold steady for third consecutive day | December 11, 2020 Fox Business
Should You Lend Your Kids Money for a Home Down Payment? The Motley Fool
Today’s mortgage refinance rates mixed — one key rate drops while two hold steady | December 15, 2020 - Fox Business
Today’s mortgage refinance rates mixed — one key rate drops while two hold steady | December 15, 2020 Fox Business
How do I get the most out of my mortgage refinance? Fox Business
10 things to know before refinancing your mortgage Fox Business
Today's mortgage refinance rates don't budge for fourth consecutive day | November 24, 2020 - Fox Business
Today's mortgage refinance rates don't budge for fourth consecutive day | November 24, 2020 Fox Business
Today's mortgage refinance rates stay low with the election underway | November 3, 2020 - Fox Business
Today's mortgage refinance rates stay low with the election underway | November 3, 2020 Fox Business
How often can you refinance your mortgage? Fox Business
Complete Checklist of Mortgage Refinancing Requirements Credible News
10 tips for getting the best mortgage refinance rates Business Insider
Refinancing your mortgage? Don’t make this mistake Fox Business
The best mortgage refinance lenders of January 2021 Business Insider
How to refinance your mortgage without closing costs Fox Business
When should you refinance your mortgage? Fox Business
Today's mortgage refinance rates hold steady at unprecedented lows | October 16, 2020 - Fox Business
How to get a low-cost mortgage refinance Bankrate.com
How to Refinance Your Home | Home Lending Chase News & Stories
Today’s mortgage refinance rates keep sinking, reaching 37-day low | November 13, 2020 - Fox Business
Mortgage refinancing is about to get more expensive Pittsburgh Post-Gazette
How much can you save by refinancing your mortgage? Fox Business
Now Is A Great Time To Refinance Your Mortgage - New Refinance Fees Delayed Until December 1 - Forbes
No-Closing-Cost Refinance: Is It Right for You? NextAdvisor
The impact of the coronavirus on mortgage refinancings Brookings Institution
Can I Refinance My Mortgage With Bad Credit? NextAdvisor