Refinance

Let’s make one thing clear right off the bat: Although a second mortgage loan is often an alternative route to a refinance mortgage, a second mortgage is not the same thing as a refinancing home loan. While this option isn’t available to all borrowers, a second mortgage can be a solid choice for those with enough home equity and the right credit score.

As with all types of home loans, a second mortgage of course has its pros and cons. A second mortgage loan (as opposed to a full refinance mortgage) normally includes lowers fees, flexible equity access, and is normally completely independent of the existing first loan. On the negative side, a second mortgage normally involves variables rates, a “mortgage interest only” structure for the first 10 years of the home loan (in most cases), early payoff penalties, and an annual fee.

Now, let’s dive right into second mortgage loans. For all intents and purposes, there are two main types of second mortgages: a home equity loan and a home equity line of credit. These are two very different things. So what is a home equity loan and how does a home equity loan work?

Refinancing a home equity loan allows a homeowner to borrow a fixed amount of cash based on the equity in their home. This lump sum is based on many factors, including but not limited to your loan-to-value ratio and credit history. On the other hand, with a home equity line of credit, your home is used as collateral, allowing you to borrow from a certain amount of credit based on a percentage of your home’s appraisal value.

These two options may sound similar, but there is one key difference between these two mortgage refinance routes. A home equity line of credit usually involves an adjustable rate, whereas home equity loans normally feature a fixed interest rate.

It is important to note that the mortgage interest on this loan may be tax deductible if it is used for property acquisition. Similarly, a household may be better off simply increasing their minimum monthly payments with their existing mortgage rather than refinancing. However, if your lender charges an early payment fee, refinancing may be the more attractive option.

There are second mortgage closing costs and specific home equity loan requirements to consider as well, and with so many variables, choosing a mortgage lender for refinancing is just as crucial as choosing the right second mortgage. If you’re considering a home equity loan or home equity line of credit, your first step is coming in for a consultation. We will listen to your specific plans and then help you make an informed decision about your personal mortgage refinance options.

We will walk you through our methodology, show you exactly how to get a home equity loan, and make sure you’re aware of what to expect during the process.

We have closed on hundreds of secondary mortgages over the past decade and counting. When it comes to your future, bet on experience and proven, executed excellence.