By Carrie Reeder
You have probably received refinancing offers in the mail or
advertised online touting your ability to pull out your homeís
equity. But a 2nd mortgage, also called an equity loan, may be
a better financing option than refinancing your mortgage. 2nd
mortgages are ideal when you just want to tap into your
plan to move soon, or are unsure about the amount you want to
Tapping Your Equity
Tapping into your homeís equity is best done through a 2nd
mortgage if you already have a low interest loan. Typically,
applying for a 2nd mortgage requires fewer fees than
refinancing a mortgage. 2nd mortgages are also paid back
sooner, so your interest payments are less.
With the costs involved in refinancing, you typically need to
keep the loan for about two years to break even. However, with
a 2nd mortgage you donít have those fees to worry about
recovering. 2nd mortgages do have minimum balance and early
off fees, but they are significantly less than refinancing
Flexible Loan Amount
A 2nd mortgage allows you to take out your homeís equity over
the course of several years. The money can be accessed with a
check, ATM card, or direct deposit, depending on how you set
your account with the lender. Additionally, you only pay
interest on the money that you have withdrawn.
Lenders tend to be more lenient with approving 2nd mortgages.
Since the amount usually is less than a traditional loan,
lenders remain confident that they will receive payment. If
have had a few credit glitches in the past two years, think
about going with a 2nd mortgage.
2nd Mortgage Mistakes
2nd mortgages arenít for everyone. You should weigh the cost
PMI and payments when choosing your financing options.
more than 80% of your homeís value will subject you to private
Your monthly payments should also be a factor in your
By taking out equity when refinancing your home, you will have
lower payment than if you had both a mortgage and 2nd mortgage
payment. Also, if you refinance in the future, you will have
pay off your 2nd mortgage.
About The Author: Carrie Reeder is the owner
www.abcloanguide.com, an informational website about
various types of loans. To view our recommended sources for
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