Mortgage Refinance
A second mortgage is a second loan. It may have nothing to do with the first lender. There is however an alternative that many are considering which is mortgage refinancing. This is when you eliminate the first mortage, and take out a replacement mortage. To be literal, the refinance mortgage pays off the first one, and then might give you different payments, or different amounts of cash in your pocket:
New Mortgage is Smaller
You would do this if you had extra cash you needed to get rid of and "put it into your house". An example might be having a kid go to college, and you need to get cash out of the bank account so the FAFSA and EFC calculations don't take all your money. If that were the only goal, you'd just accelerate payments on your first, existing mortgage. If your first mortgage won't let you pay early without penalty, or your first mortgage is not suitable for you any more in the current financial environment (monthly payment, lifetime, interest rate, etc), then maybe you want to get rid of the first one and replace it with a Refinance Mortgage.
New Mortage is Larger
You would do this if you want more cash in your pocket - maybe to buy a car or buy a home improvement
New Mortage is Same Value
You would do this only if the new loan conditions (payment, lifetime, interest rate, etc) are more attractive. Any new mortage, including a Refinance Mortgage, has some start up costs. Be sure to factor these in if you think a Refinance is a good deal. I've seen costs as low as $400 and upwards of $4000. Check all those MortgageLineItemsCosts!
A mortgage refinance allows you to cash out on the equity of your home, lower your interest rates, and shrink your monthly payments. Ultimately you should consider eliminating debt and reducing your payments. Many times refinancing a mortgage is a better choice than getting a 2nd mortgage.

The primary reason for refinance a mortgage is to accommodate the financial climate that is to your advantage.
  1. The Incremental amount of money you want is so small, a 2nd mortgage isn't available or cost effective.
  2. Your first mortgage was done under different circumstances and continues to be a bad deal, so you are considering newer options.
  3. Reset the payment period. Make the blanket of debt thinner, and stretch it out over more years.

Created by brian. Last Modification: Wednesday 11 of October, 2006 17:38:31 CDT by brian.