Mortgage Refinancing VS Second Mortgage
Should you go for second mortgage or prefer refinancing your first mortgage? Second mortgage is always offered at higher rate of interest than the first one. Moreover, second mortgage reduces your equity in the home. These two drawbacks of second mortgage give upper hand to mortgage refinancing. Mortgage refinancing is done to cut down monthly mortgage repayments and reduce interest rate.
Refinancing your existing mortgage means taking another loan to repay the first one. Now you may ask why will I need another loan to repay the first one and what’s the benefit of doing so? There are multiple benefits of refinancing but the most important of all is to reduce your monthly payments. How to do that? Keep a watch on the mortgage rates. They are as dynamic as stock market index! Presently, the mortgage rate is touching the historic low point. This could be a good time to refinance your mortgage loan.
Lock in your rate now to get benefits of lower interest rate. Your new lender will repay your first mortgage. You can easily lower down your monthly payments by 1000s of dollars, depending on what you are paying now. In the long run or at the end of your loan life, you will find that you have saved a huge amount for yourself by refinancing at right time.
Besides savings, refinancing also gives you benefit of cashing out the equity in your home. Let’s assume you have first mortgage balance of $100,000 and your property value is 200,000. The new lender can offer you much more than your first mortgage balance. The difference in your first mortgage balance and the amount you are borrowing from new lender can be used for multiple purposes. You can use that money for home improvements or for buying yourself a new car. Refinancing, if seen from this perspective, not only saves your fortune but also can help you building new assets.
It’s better to refinance now and save great sum of money that can be used for many other purposes. After refinancing you will find that your monthly payments have gone down and equity in your home is building faster than ever.