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Getting a Second Mortgage Can Be Better Than Refinancing
Here are some reasons why getting a second mortgage can be easier
and better than refinancing your home. Of course, in your
personal situation, refinancing might be better for you.
Tap Into Your Equity
You can use your unused equity to get a 2nd mortgage.
It will save you money on fees because of the smaller loan
amount. Also, usually on a 2nd mortgage, you will pay
back the loan in a shorter amount of time, as opposed to the
first mortgage.
It's a Short Term Loan
With the costs involved in
refinancing, you typically need to keep the loan for about
two years to break even. However, with a 2nd mortgage you
don’t have those fees to worry about recovering. 2nd mortgages
do have minimum balance and early pay off fees, but they
are significantly less than refinancing fees.
Get a Home Equity Line of Credit A 2nd mortgage
can be taken out as a line of credit, which allows you
to take out your home’s equity over the course of several
years. The money can be accessed with a check, ATM card,
or direct deposit, depending on how you set up your account
with the lender. Additionally, you only pay interest on
the money that you have withdrawn.
Higher Rate of Approval Lenders
are usually more lenient
when approving second mortgages or home equity loans. Since the amount
is usually less than a first mortgage,, lenders can be more sure
that they will receive payment. If you have had a few credit
glitches in the past two years, think about going with
a second mortgage.
Weigh Your Options Second mortgages aren’t for everyone.
You should weigh the cost of PMI and payments when choosing
your financing options. Borrowing more than 80% of your
home’s value will subject you to private mortgage insurance.
Your monthly payments should
also be a factor in your decision. By taking out equity
when refinancing your home, you will have a lower payment
than if you had both a mortgage and 2nd mortgage payment.
Also, if you refinance in the future, you will have to
pay off your 2nd mortgage.
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