If you are a current homeowner and have lived in your house for an extended period of time, you most likely have accumulated a substantial amount of home equity. The equity in your home is the difference between your home’s appraised value and the amount you owe on your mortgage. This means that the more payments you make towards your mortgage, the more equity you will have.
Once you have enough equity built up, you can access this money through a second mortgage or through refinancing. So, to help you get started, your Oakville mortgage broker with Loewen Group Mortgages has listed the difference between a second mortgage and refinancing your existing one.
What Is A Second Mortgage?
A second mortgage is where you take out a loan on your home, by accessing your home’s equity, in addition to the mortgage you already have. A second mortgage is generally easier to qualify for then refinancing because there are less strict qualification requirements. You could qualify for a second mortgage if you only have 10% equity in your home. Also, if you have a lower credit, typically between 550 and 700, you will get approved for an additional mortgage.
Benefits of a second mortgage are that by accessing the equity in your home, you can use that amount any way you would like. If your goal is to pay off as much high-interest debt or if you would like to go on a dream vacation, your second mortgage can help make this happen.
What Is A Mortgage Refinance?
An Oakville refinance is where you replace your current mortgage with an entirely new mortgage. This is an excellent option if the current market interest rates are significantly lower than what your current contractual rates are. Some homeowners even refinance to change their mortgage terms. If you currently have a 30-year mortgage and are wanting to change to a 15-year mortgage, or if you are wanting to extend your amortization period, then refinancing is the best option for you.
To qualify for a mortgage refinance, you will need to have at least 20% equity in your home, which means you can borrow up to 80% of your home’s overall value. You will also need to be sure and have a stable income and a good credit score.
For more information on the difference between a second mortgage and refinancing or to get started on your application today, please contact your local Oakville mortgage broker with Loewen Group Mortgages at 416-907-3173.