The Difference Between a Second Mortgage and a Refinance
If you are currently a homeowner and are looking for some extra cash or are wanting to change the terms of your loan agreement, then obtaining a second mortgage or refinancing your current one may be the best choice for you.
To help you get started, your local mortgage broker with Lending Circle has listed the key differences between a mortgage refinance and a second mortgage so you can figure out which option is best for you.
A second mortgage means you will be obtaining an additional mortgage alongside your existing one and your home is put up as collateral. Having two mortgages also means you will have two separate loan payments to make every month. Homeowners apply for a second mortgage in order to tap into their home equity and access the available cash.
Your home equity is the difference between what is owed on your current mortgage and the home’s overall value. Therefore, the more payments you make towards your loan, the more equity you will have. Once you have been approved, you can access this money and spend it however you would like. You could use it to renovate your home, purchase new real estate, pay off high-interest loans, pay for higher education, or even go on a dream vacation.
To apply for a second mortgage, most lenders prefer you to have at least 10%-20% equity in your home. Contact your local lender for more details.
Refinancing Your Mortgage
Refinancing your mortgage means you are paying off your first mortgage entirely and are obtaining a new loan. This is a great option if your current mortgage in the GTA has a high-interest rate. Rates are currently significantly lower than they were 5-10 years ago, so if you bought a house during that time, you may be spending way more in interest than you have to. Therefore, consider refinancing your existing mortgage to change your interest rate.
Homeowners also choose to refinance their mortgage if they want to change their loan agreement. If your loan term is about to expire and you need more time to pay it off, you can refinance your loan and extend the amortization period. This also could be done if you wish to shorten your loan and pay it off sooner.
If you have more questions on the difference between obtaining a second mortgage and refinancing your existing one, please contact
The Lending Circle team at 1 (866) 289-1724.