Real Estate refinancing is the replacement of the
present mortgage secured by the property with a new
mortgage using the same property as collateral.
Real estate refinancing can be used to take some
built up equity out of the property, to replace the
existing mortgage with one having a lower interest
rate or to move other debt that is not tax favorable
to the mortgage which does have tax advantages.
An alternative to refinancing to take some equity
out of a property is to take out a second mortgage.
A second mortgage is subordinate to the first mortgage
and usually has a higher interest rate than can be had
with a new first mortgage.
A second mortgage offers the advantage of not
altering the original mortgage and usually involves
less scrutiny and paperwork. The advantage is
that it is an easy way to move high rate credit card
and other non-secured debt to a lower second mortgage
rate with tax advantages.
A second mortgage can also be structured in the
form of a credit line. In this type of second
mortgage the loan amount is in place but interest is
only charged on the amount of the credit line being
used. It also has the flexibility to be used,
paid down and used again.
In conclusion, if your objective is to reduce the
interest rate on your first mortgage or you wish to
use the lowest rate available to pull equity out of a
property, then real estate refinancing is for you.
However, if you just need a quick, easy way to access
some equity to pay off some credit card debt or use
equity as a credit line, then a second mortgage might
better fit the bill.