Tips for Refinancing a Second Mortgage
Refinancing a Second Mortgage
For individuals that have two mortgages,
there may be advantages to refinancing a second mortgage. If you're one
of these individuals and are considering refinancing a second mortgage,
there may be good reason for it.
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Reasons for Refinancing a Second
Mortgage
1. Your credit scores are higher.
If your credit scores have gone up since
you previously obtained your loan, it may be an enormous benefit to consdier
refinancing a second mortgage. Higher credit scores can lead to lower interest
rates, which in turn lead to lower payments or even a shorter payoff term.
2. You need the added funds for a business
purchase or expense.
If you find that your business could use
some improvement, whether through the purchase of equipment or improvements
in other areas, refinancing a second mortgage can offer funds needed in
these areas, often at a lower interest rate than a business loan or signature
loan.
3. You've generated some high interest
bills.
If you've had emergency purchases that
you've needed to make using credit cards, chances are that the interest
rates are very high. It may be wise to consider refinancing a second mortgage
in order to pay off these bills. The payment term will be shorter, the
interest rate lower, and the interest paid could be tax deductible.
If refinancing a second mortgage is in
your future, consider the advantages and disadvantages of refinancing.
Advantages of Refinancing a Second
Mortgage
1. Interest rates have decreased.
Lower interest rates may have become effective
since you initially obtained your second mortgage. Refinancing a second
mortgage could mean locking into lower interest rates, and ultimately,
can offer lower monthly payments.
2. Funds are needed to pay off bills or
make a business purchases.
If you find that you could use money to
pay off high interest bills or make a business purchase, for example, refinancing
a second mortgage can offer some excellent options. By reviewing the equity
added into your home or property since the second mortgage was originally
financed, your lender will be able to determine how much money you can
obtain by refinancing a second mortgage. A home appraisal will be required
for this to happen, but the benefit can be a huge advantage.
3. Interest payments may be tax deductible.
Consult with your financial institution
or tax preparation specialist to verify, but in many instances, interest
paid through refinancing a second mortgage may be tax deductible.
Disadvantages of Refinancing a Second
Mortgage
1. Interest rates may be higher.
If you obtained your second mortgage while
rates were at an all-time low, refinancing a second mortgage could mean
that your interest rates will increase by two percent or more.
2. Payments may be higher.
If you cash out on equity that has increased
in your home or property since you initially signed for your second mortgage,
refinancing a second mortgage will obviously mean higher monthly payments.
Consider the other factors involved, though. If the cash will be used to
pay off high interest bills, or if it will be used to purchase much-needed
business equipment, the added payment may be of larger benefit than if
the refinancing did not occur.
Be Prepared When Refinancing a Second
Mortgage
Proper preparation is your best bet in
refinancing a second mortgage. Refinancing a second mortgage can be advantageous,
or it can be of harm to your budget, depending on the circumstances. Use
careful consideration in refinancing a second mortgage.
Since credit scores can be lowered if your
reports are requested by too many lenders, do your homework prior to contacting
lenders. Request your credit reports from the three credit reporting agencies:
Equifax, Transunion, and Experian. Be aware of your credit scores, and
let potential lenders know what your scores are prior to requesting their
interest rates or application.
Do not provide your social security number
or tax identification number until you have informed the lender of your
credit scores and have their interest rates. Shop around with different
lenders to find out what rates they currently offer for refinancing a second
mortgage. Once you have this information from several lenders, and understand
their terms for repayment, choose the lender that best suits your needs.
Consider all factors, including the loan
amount and the interest rate, and choose a lender that does not offer a
penalty for early payoff. At that point, it's safe to move forward and
request an application from the lender best suited for you.
Rebecca Game is the founder of Digital
Women ®, an online community for women in business. A 30 year entrepreneur
and dedicated to helping other women. Visit her site: Loans
for Women
http://loans.digital-women.com
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