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You have probably received
refinancing offers in the mail or advertised online touting your ability
to pull out your homes equity. But a 2nd mortgage, also called an equity
loan, may be a better financing option than refinancing your mortgage.
2nd mortgages are ideal when you just want to tap into your equity, plan
to move soon, or are unsure about the amount you want to borrow.
Tapping Your Equity
Tapping into your homes equity is best done through a 2nd mortgage if
you already have a low interest loan. Typically, applying for a 2nd
mortgage requires fewer fees than refinancing a mortgage. 2nd mortgages
are also paid back sooner, so your interest payments are less.
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
dont 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.
Flexible Loan Amount
A 2nd mortgage allows you to take out your homes 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withdrawn.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 Approval
Lenders tend to be more lenient with approving 2nd mortgages. Since the
amount usually is less than a traditional loan, lenders remain confident
that they will receive payment. If you have had a few credit glitches in
the past two years, think about going with a 2nd mortgage.
2nd Mortgage Mistakes
2nd 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 homes 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.
About the Author: Carrie Reeder is the owner
http://www.abcloanguide.com, an informational website about various
types of loans. To view our recommended sources for 2nd mortgage loans
online, visit this page:
http://www.abcloanguide.com/mortgageloans.shtml
Source: www.isnare.com
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