Second Mortgage Refinance - Some Must-Know Facts
Try searching for second mortgage refinance on Internet and you will be bombarded with hundreds of alluring offers - all claiming to be the best. However, before you decide to go ahead with one of them, there are some basic facts that you must know in this regard. Availing such a loan is a big decision, as it is going to add another financial burden on you. Following are some of the must-know facts, which will help you make an informed decision.
Two Types Of Refinancing
It is important for you to understand that second mortgage refinance loan comes in two varieties. It may be either a plain home equity loan or home equity lines of credit. These two are different things and have different pros and cons. Home equity loans are just like auto loans where you get all the money at once. Irrespective of how much you are going to use, you are responsible for paying off interest on the entire amount you borrowed. On the other hand, if you avail home equity lines of credit as a second mortgage refinance, you get the liberty to borrow only that much amount that you exactly need. You need to pay the interest on the amount you have used. The unused equity is not taken into consideration for the repayment of such loans. Your repayment obligation in this case is very flexible, as you can pay only interest or if you wish you can pay some portion of the outstanding balance along with the monthly interest.
Easier Than Refinancing Mortgage
If you compare the process of refinancing and availing a second mortgage, you will find that obtaining the latter is an easier process. It is usually a straightforward process with no complications. You get the approval without doing much paperwork. It even takes lesser time in comparison to getting approved for refinancing. However, you should note that the mortgage refinance rate is usually lower than what is charged for a second mortgage.
A Low Fee Loan
However, in comparison to other traditional loans, second mortgage refinance costs you a very low fee. In fact, if you wisely shop around, you can even get a no-fee loan or line of credit.
Tax Deductible Interest
Another great thing is that the interest charged on it is usually tax-deductible - especially the interest paid on the first $100,000 of the total borrowed amount. If you have borrowed $100,000 or lesser, you do not need to pay tax on the interest - irrespective of where and how you are using the money.
However, you have to be very careful because even if you have got the best mortgage refinance rate, if you do not repay the amount in time, you may lose your home. Always remember that it is always a double-edged sword to put your home up as collateral. So, play your cards wisely.