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Refinancing Second Mortgages
By Rebecca Game, Thu Dec 8th
Refinancing a Second Mortgage For individuals that have two mortgages, there may be advantagesto refinancing a second mortgage. If you're one of theseindividuals and are considering refinancing a second mortgage,there may be good reason for it. Reasons for Refinancing a Second Mortgage
1. Your credit scores are higher. If your credit scores havegone up since you previously obtained your loan, it may be anenormous benefit to consdier refinancing a second mortgage.Higher credit scores can lead to lower interest rates, which inturn 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 inother areas, refinancing a second can offer fundsneeded in these areas, often at a lower interest rate than abusiness loan or signature loan. 3. You've generated some high interest bills. If you've hademergency purchases that you've needed to make using creditcards, chances are that the interest rates are very high. It maybe wise to consider refinancing a second in order topay off these bills. The payment term will be shorter, theinterest rate lower, and the interest paid could be taxdeductible.
If refinancing a second is in your future, consider theadvantages and disadvantages of refinancing. Advantages of Refinancing a Second Mortgage 1. Interest rates have decreased. Lower interest rates may havebecome effective since you initially obtained your secondmortgage. Refinancing a second could mean locking intolower interest rates, and ultimately, can offer lower monthlypayments. 2. Funds are needed to pay off bills or make a businesspurchases. If you find that you could use money to pay off highinterest bills or make a business purchase, for example,refinancing a second can offer some excellent options.By reviewing the equity added into your home or property sincethe second was originally financed, your lender will beable to determine how much money you can obtain by refinancing asecond mortgage. A home appraisal will be required for this tohappen, but the benefit can be a huge advantage. 3. Interest payments may be tax deductible. Consult with yourfinancial institution or tax preparation specialist to verify,but in many instances, interest paid through refinancing asecond may be tax deductible. Disadvantages of Refinancing a Second Mortgage 1. Interest rates may be higher. If you obtained your secondmortgage while rates were at an all-time low, refinancing asecond could mean that your interest rates willincrease by two percent or more. 2. Payments may be higher. If you cash out on equity that hasincreased in your home or property since you initially signedfor your second mortgage, refinancing a second willobviously mean higher monthly payments. Consider the otherfactors involved, though. If the cash will be used to pay offhigh interest bills, or if it will be used to purchasemuch-needed business equipment, the added payment may be oflarger benefit than if the refinancing did not occur. Be Prepared When Refinancing a Second Mortgage Proper preparation is your best bet in refinancing a secondmortgage. Refinancing a second can be advantageous,
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orit can be of harm to your budget, depending on thecircumstances. Use careful consideration in refinancing a secondmortgage. Since credit scores can be lowered if your reports are requestedby too many lenders, do your homework prior to contactinglenders. Request your credit reports from the three creditreporting agencies: Equifax, Transunion, and Experian. Be awareof your credit scores, and let potential lenders know what yourscores are prior to requesting their interest rates orapplication. Do not provide your social security number or tax identificationnumber until you have informed the lender of your credit scoresand have their interest rates. Shop around with differentlenders to find out what rates they currently offer forrefinancing a second mortgage. Once you have this informationfrom 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 interestrate, and choose a lender that does not offer a penalty forearly payoff. At that point, it's safe to move forward andrequest an application from the lender best suited for you. About the author:Rebecca Game is the founder of Digital Women ®, an onlinecommunity for women in business. A 30 year entrepreneur anddedicated to helping other women. Visit her site: Loans forWomen http://loans.digital-women.com
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