Are you considering accessing your home’s equity? Two methods for you to go about doing so, including refinancing your mortgage or taking out a second mortgage. The two require different criteria and varying reasons for choosing between them, which should prompt you to decipher which method is most suitable for you. To determine which option is the most practical for your situation, Dhugga Mortgages has a guide for your comprised of what second mortgages and refinancing are and highlighting the difference between the two.
Here’s everything you need to know before deciding between refinancing your mortgage or getting a second one:
Cash-Out Refinancing: Explained
When it comes to refinancing a mortgage, the original mortgage is almost always altered in some aspects. This change can be applied to the term, rate, the amount borrowed, length; or a combination of two or many more. The homeowner in the case of cash-out refinancing has decided to increase their amount borrowed. Cash-out refinancing involves the homeowner using the value of their property to take out a new mortgage that is more than the sum of the existing mortgage they have. Therefore, the homeowner will pay off their current mortgage and acquire the balance in a lump-sum payment during closing. The benefit of cash-out refinancing includes the following:
- You may use the value of your home to take out funds for any purpose you choose.
- You can choose to write off the initial cost of the mortgage over a long duration of time to keep low payments and repay your loan gradually.
- You only carry one mortgage and may be able to achieve an appealing interest rate.
Second Mortgage: Explained
A second mortgage is also known as a home equity loan which is a method that involves the homeowner choosing to use their equity to take out another mortgage separate from their first mortgage. The second mortgage is separate from the initial mortgage which means that the homeowner does not have to modify their first whatsoever. The benefit of a second mortgage/home equity loan includes the following:
- The second mortgage can be arranged promptly, which makes it the most viable option for a payout of emergency bills.
- The home equity loan’s loan-to-value ratio can rise as high as 95% for certain properties.
- Homeowners that have low credit can be approved much more quickly.
- If homeowners have significant equity, they may be able to borrow a larger lump sum regardless of bad credit or their income.
Whether you’re looking to refinance your mortgage or opt for a second mortgage, let out specialists at Dhugga Mortgage in Brampton assist you every step of the way. Our Mortgage Centre specialist is equipped with years of experience and knowledge on the industry, to effectively help understand how each role accesses your home’s equity.
We have been proudly serving the community since 2012 with professional, high-standard mortgage advice to find you the best financial options. Contact us online today by filling out your loan purpose and information to get started!