Working as a Hamilton mortgage broker brings me into contact with people from all walks of life, each with their own unique needs. It doesn’t just end at helping a client to get a mortgage or buy a home. I also deal with a lot of people who are looking to refinance or take out a second mortgage. There is a big difference between the two, and it’s important to know which option is the best for your situation.
Why Refinance First Mortgage or Take Out a Second Mortgage?
There are many reasons that people choose to do this. They may be looking to consolidate their debt in order to make lower monthly payments. Clients may be looking to do home improvements and need to tap into their home equity to do so. Whatever your reason is for doing either, it’s important to speak with one of our Hamilton mortgage brokers
Second Mortgage vs. Refinancing First Mortgage
Taking out a second mortgage, or home equity loan lowers your payments and interest rates when paying out loans and credit card balances. It can also provide funds for such things as home improvements, education, or to help a child purchase a home or pay for school. It also allows your current mortgage to stay on its original payment schedule and avoid any potential penalties.
By refinancing your first mortgage you can increase your existing mortgage to pay off all your debt so that you have one low payment at a low interest rate. You will be able to save money on your existing mortgage as well as the high interest rates on loans and credit cards. You can also access funds for other uses already mentioned.
So which option is best for you? That depends on your situation, your Hamilton mortgage broker can help show you which is the best option for your unique situation.
Long Term Goals
If you are looking at the long term advantages, refinancing can be a good option. Especially if you have been stuck with a higher fixed rate or variable rate mortgage and the interest rates suddenly drop. Going with the refinancing options lets you lock in a better rate for your mortgage term.
Refinancing is also the better option if you are looking to cash out on your home equity, for example, if you are looking to do home renovations to increase the value of your property. This raises the value of your property over a long-term, which would justify taking out a longer repayment time frame through refinancing.
However, if yours is a short term need, a second mortgage may be the better option, This is because it will continue to let you pay off your original mortgage loan while giving you a lower interest rate.
From a Savings Perspective
By lowering your interest costs you keep more money in your pocket, or pay off your debt faster.
Contacting one of our Hamilton mortgage brokers is the best way to see which option will benefit you the most. The process means comparing the overall savings between your new payment amounts, how much you will save on any of the debts you choose to pay off This is subtracted from your refinance amount, which shows you how much you end up saving in the long run.