Second Mortgage / Home Equity vs. Refinance
Here are some reasons to take out a second mortgage or a home equity line of credit instead of refinancing.
1. Second Mortgages usually have an interest rant that is twice or even three times as high as your first mortgage rate. You can refinance instead and keep a very low rate. In the long run a second mortgage will just cost you money in interest charges.
2. Home equity lines of credit are designed for mortgage account executives (salespeople) to sell you on using it like a credit card attached to your home. They will try to convince you to use it over and over again.
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3. A refinance loan is better for the equity in your home. Very few companies will refinance your home at 100% of it’s value without forcing you to take out a second mortgage. You don’t want to use 100% of your equity because that means you no longer have that equity to fall back on in emergency situations.
4. Second Mortgages and Home Equity lines of credit are designed to provide account executives (salespeople) with another tool to sway you into putting another commission in their pocket.
5. Your equity is a precious thing and should not be used for unnecessary add ons or impulse buys. If you don’t need it and there is even a slight chance you can’t afford it, then don’t get a second mortgage to buy it.
The only reason that I would ever recommend a second mortgage or a home equity line of credit is in an emergency situation. Only when there is no other option and you must take out a loan would I recommend either one of these options.
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The difference between a second mortgage loan and mortgage refinancing has been explained in this article. A second mortgage loan can be taken out only in case you have already taken out a home mortgage loan and have built up substantial equity in it. A second mortgage loan is sub-ordinate to the first mortgage loan and the rate of interest associated with a second mortgage loan is higher than the rate of interest associated with the original mortgage loan. In the event of default, the first mortgage loan is taken care first and the second mortgage loan is taken care of thereafter. On the other hand, refinancing is the replacement of the original mortgage loan and usually it is taken out to take advantage of more suitable loan terms and conditions. To know more about second mortgage loan, log on to http://www.mortgagefit.com/second-mortgage.html
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