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Refinancing your houses
mortgage is not the same thing as getting a second mortgage. While both
allow you to cash out your homes equity, terms and rates differ between
the two types of loans. To know which financing option is best for you,
learn each loans 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 homes 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 homes 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.
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 refinance mortgage
loans online, visit this page:
http://www.abcloanguide.com/refinance.shtml
Source: www.isnare.com
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