Refinancing Your House - How To Know Whether To Refinance Or Get A Second Mortgage By Carrie Reeder At Isnare.com Ezine Articles

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.

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=9377&ca=Finances

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.