Second Mortgage/Home Equity vs. Refinance
Why should you take out a second mortgage or a home equity line of credit instead of refinancing?
Well, Maybe You Shouldn’t Do a HELOC
Why Not?
1. Second Mortgages usually come with an interest rate this is much higher than your first mortgage rate. You can refinance instead and lock in a low rate. In the big picture, a second mortgage will just cost you money in interest charges.
2. Home equity lines of credit are designed for mortgage account executives (salespeople) to sell you on using it like a credit card attached to your home. They will try to convince you to use it over and over again.
3. A refinance loan is better for the equity in your home. Very few companies will refinance your home at 100% of it’s value without forcing you to take out a second mortgage. You don’t want to use 100% of your equity because that means you no longer have that equity to fall back on in emergency situations.
4. Second Mortgages and Home Equity lines of credit are designed to provide account executives (salespeople) with another tool to sway you into putting another commission in their pocket.
5. Your equity is a precious thing and should not be used for unnecessary add ons or impulse buys. If you don’t need it and there is even a slight chance you can’t afford it, then don’t get a second mortgage to buy it.
The only reason that you should consider a second mortgage or a home equity line of credit is in an emergency situation.