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Refinance or Second Mortgage?
January 6, 2020 | Posted by: Gian Manalastas
Should I refinance or take out a second mortgage?
This is one of the most frequently asked questions whenever someone wants to take equity out for any reason.
The answer to that question will depend based on your current mortgage situation, the type of mortgage you currently have, your renewal date, the purpose of the loan, etc.
Refinancing your mortgage before your renewal date could mean paying a penalty for breaking your mortgage early. It could be 3 months worth of interest or interest rate differential. This could mean paying out thousands of dollars. If your mortgage is up up for renewal in the next 120 days, you will most likely avoid paying a penalty and this will be the bets time to look into refinancing your mortgage.
Refinancing your mortgage with your bank or a different bank can get you the lowest rate possible as it gives you the chance to shop around for the best rate and the best mortgage product for you. For example, if you're looking at refinancing to do some home improvements and planning to stay long term, you might want to look into a refinance plus improvement type of mortgage.
If your mortgage is not up for renewal for a few months or if you're looking to do some home improvement to sell in a few months, or looking at taking equity out to invest in a business, maybe an equity loan or a second mortgage might be the better option. Taking out a second mortgage instead of refinancing avoids paying out penalties if your mortgage isn't due for renewal anytime soon.
Your best bet before you make a decision is to speak to a mortgage professional and discuss your plan to see which product would work best based on your current situation.
If you’d like to speak to somebody about refinancing or taking out a home equity loan or second mortgage, contact us on the link to get in touch with one of our agents.