Often times, people confuse refinancing their mortgage with opening a second mortgage. While this can be a common misunderstanding, it is important for you to know that a second mortgage is entirely new. A second mortgage can be taken out on a completely different item, for a different amount of time. Everything from payment options to the company you obtain your loan through can be different when opening a second mortgage. Refinancing your mortgage, however, is entirely different.
Refinancing involves closing costs and you have to be careful with these. A closing cost can range anywhere up to around $1800. It is dependent upon what kind of loan you received and how large the sum is. There are lenders with no closing costs, but you need to be aware of the fact that the regularly charge much higher interest rates than other companies. Another aspect to consider with refinancing is the home itself. If it is your home, you must ask yourself how long you plan on staying in this home. If there is even the slightest possibility of you relocating in the future, refinancing your loan so that your payments are less per month may be an unwise decision as this will result in a longer term period.
Refinancing a loan and obtaining a brand new one can be extremely similar. You’ll be conducting a good amount of research and you’ll be doing a lot of math in an attempt to figure out what is financially best for you currently. However, amongst so many other variables, you must consider the fact that not every mortgage is able to be refinanced. Your home value must justify a new loan, or else you’re not getting one. If you’re home value doesn’t justify a new loan, you may end up having to make an entirely new down-payment on your home just to lower your monthly payment costs. Many times, moves like this aren’t beneficial and you will want to avoid them.
As you can see, the biggest difference between refinancing a mortgage and opening a brand new one is that you are given many more options when first seeking out a mortgage. Matters get much trickier with refinancing and you have to know who to trust. In addition to knowing who you can trust, you have to be able to objectively evaluate what exactly it is you’re looking for and what you need in order to get there, Sometimes refinancing can require sacrifice on your part. You must be willing to consider all options available.