There are situations in life when you need more cash or capital. Your home is a rock-solid investment and you can get more loans on your equity. Many clients come to us asking whether to apply for a second mortgage or just refinance their existing loan. The answer, it all depends upon your personal and financial situation.
Sometimes refinancing is the right choice and in some cases, the second mortgage is best suited to our client’s needs. To help you understand the difference between these two options, below is a brief discussion about both home equity loan products.
One of the most common questions we get is refinancing the same as renewing a mortgage? The simple answer is, “NO”. One of the key differences between refinancing and renew is in refinance involves “changing one or more aspect” of the mortgage. The change can be applied to the amount, rate, term and /or length of the mortgage.
In the refinancing process, the homeowner takes a new first mortgage (higher amount than their current mortgage) against their existing home equity. In this manner, they are able to pay off their existing mortgage and receive the remaining amount as cash payment in their account after deducting the closing costs.
Why should you choose to do it?
One of the primary reasons people refinance their homes is the attraction of one large cash payment. There are instances when you need extra money and you need it fast! Private lenders let you apply and get approved fast for refinancing your existing home. Lez Gomez and his team of mortgage brokers in Whitby have access to a pool of private funds and they help you refinance your existing home equity for a new loan.
At the end of the transaction, you will still have one single payment, one rate, same home and MORE cash in your pocket. This will allow you to pay off your existing mortgage and use the remaining money for any expenditure needed at that time. If you have a good credit history you can enjoy all these benefits at a very excellent rate.
Second Mortgage in Whitby:
The second mortgage in Whitby is as the name suggests another mortgage taken out against the existing home equity. This second mortgage is a different transaction from the first mortgage. The homeowner chooses to get a new mortgage on new terms and rates. This is a completely separate transaction. At the end of the day, the homeowner will have two different payments and mortgages. This type of mortgage is also known as a home equity loan.
Why should you choose this option?
One of the biggest advantages of this type of loan is it get approves quicker than the other option. Since it is a new loan directly taken against the home value, people with damaged credit or low income can get approved for any amount (as high as their home equity allows). Many people use this loan option to pay off their current debts and improve their credit and financial ratings.
Which is the best option for you?
Everyone wants the best deal for themselves. It all comes down to “mortgage averaging”. Some people believe that 2 low-interest loans are better than one low and one high-interest loan. But sometimes after all the fees and interest payments, it ends up costing them more. Along with the interests, there are other fees and costs involved with the application of approval of both of these types of loans. One of the Key in determining which option to choose is calculating the mortgage average for all your mortgages and interest rates. The mortgage average is achieved through the following formula
[(1st Mortgage x Interest Rate) + (2nd Mortgage x Interest Rate)] / [Total Mortgage Amount]
It may seem complicated but we have helped hundreds of people make the right decision for themselves and their finances. We have resources to explore rates for both of the options for you. we do the research, math, and negotiation on your behalf so you can enjoy the best value from the loan.
If you are in the market for another home equity-based loan, call or visit us today and we will help you get the best term and rate for you.
GET YOUR SECOND MORTGAGE IN WHITBY FOR A LIL LEZ