You may find yourself in need of extra cash, and because of this, the idea of applying for a second mortgage may appeal to you. The first mortgage you have applied for is the loan that you took to purchase your current home and will be the primary lien until you manage to complete paying off the mortgage. Second mortgage, on the other hand, is the mortgage that you get from the equity that your property has earned through your mortgage payments instead of applying for refinancing.
Facts about Second Mortgage
There are a few things that you need to keep in mind when it comes to second mortgage such as:
The second mortgage, as the name suggests, will go second to your primary mortgage in terms of importance.
The steps for applying for a second mortgage is the same as that of first mortgage where you will need to submit your personal information, financial paperwork, home appraisal, as well as other pertinent information needed for your application to be considered.
There are certain fees that you need to pay when applying for second mortgage such as appraisal fees, closing costs, and even origination fees just to name a few.
Second mortgage means that you will be making two monthly payments instead of just one. Your first mortgage should be paid on the same day as the second mortgage and paid within the month to avoid defaulting.
What about mortgage refinancing?
In mortgage refinancing, it means that you will be applying for a new loan on your home. This means that you will have to repeat the process that you underwent when you applied for your first mortgage.
It is possible that you get a less favorable rate when you apply for mortgage refinancing based on the current rate in the market.
You will need to pay new fees required to obtain all the documents that you will need for mortgage refinancing such as title fees, appraisal fee, and the like.
The difference between second mortgage and mortgage refinancing is that the second mortgage relies on the equity that your property has earned over the years. Mortgage refinancing revolves around applying for a new loan using the same property that you are currently residing in. Depending on your needs, either one can help resolve your need for extra cash whether you will be paying for educational fees, upgrades, and the like. It all boils down on how much you need to borrow and your ability to pay for it.