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Refinancing Your House - How To Know Whether To Refinance Or Get A Second Mortgage

by Carrie Reeder

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.


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.

About the Author
Carrie Reeder is the owner, an informational website about various types of loans. To view our recommended sources for refinance mortgage loans online, visit
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