Fixed Rate Refinance - Second Mortgage

Second Mortgage

Define yourself...

A second mortgage is any loan you take out after your first loan while that mortgage is still in play. Usually, second mortgage refers to any form of equity financing, and these are the loans you take out once you've established your financial strengths. Debt consolidation, home improvements, outside purchases or major investments - you can use the money from a second mortgage for anything, even a refinance.

Second costs

Apply for any mortgage quote today for that prospective second mortgage and you'll discover something unexpected - borrowing against your equity is more expensive that borrowing off nothing at all. Purchase home loans carry lower rates than equity financing, meaning you will pay more when you have more to lose. This may seem contradictory, but you have t remember your lender as well. They have more to lose by your failed repayment because they have second place on the lien to your home - only after your first mortgage lender takes what they are due will your second mortgage provider get their fair (or unfair) shake.

The second mortgage vs. refinancing

Second mortgages can refinance your home, but a refinance is not a second mortgage. Rather, a refinance is the transfer of your first home loan obligation from one provider to the next - or from one loan type to another with that same provider. That being said, you can take out a second mortgage against your home equity and pay off the remaining balance of your first mortgage, but there is a lot wrong with that:

any second mortgage you find ever will carry higher rates that first mortgages - as well as mortgage refinances. Thats because the lender holding the lien against your home has first dibs if you falter on repayment, while the lender providing the second mortgage has second dibs and therefore greater risk of loss
there are simply much smarter, better ways to make or save money with a second mortgage. Rather than wasting it on a refinance make a profit by taking out fixed rate home improvement loans and putting the money into your investment.

You will have a choice when the time for refinancing comes either to use your equity or apply for a straight up mortgage refinance. 99 times out of 100 you should choose the pure refinance mortgage.