If you have crossed over the first mortgage and thinking for a refinance or second mortgage options, it is better time to know about the two and its pros and cons.
Refinance :
Refinance is taking a fresh mortgage in place of the first one with a view to reduce interest or to avail the equity.
Second mortgage :
Second mortgage is also called as equity loan, which is primary taken to take control of the equity of your property.
Tapping your equity is better done through second mortgage if you have low interest loan. Applying for second mortgage is easier and cheaper compared to the refinance option. Due to sheer cost factor it will take atleast two years to breakeven in refinancing, but because of low fees second mortgage is better.
In terms of accessing your home equity, it possible to access over a period of time if you take second mortgage, which is not so in the refinancing option. You will also have access to various modes like cheques, atm card or direct deposit option to access your equity depends on how you set up the loan.
If you have cash flow problems it always better to go for the second mortgage since the approval terms will be easier and loan provider will be having confidence of the repayments.
On the other hand refinance can be option if your present mortgage is of high interest and your interest saving will be more than 1 %.
It is important to take your current situation during the evaluation of these options. The suitability is mainly depends on the individual circumstances and requirement.
If you unsure to take a decision, it is prudent to discuss with a financial consultant. Time and again it proved by taking a proper advice you tend to save a lot of money.
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