The Million Dollar Question: Cash-Out Refinance vs. Second Mortgages vs. Reverse Mortgages
When considering taking out a loan on your home, there are three main options: cash-out refinance, second mortgage, and reverse mortgage. Each option has different pros and cons, so it's important to understand all three before making a decision.
Cash-out refinance:
A cash-out refinance is when you take out a new loan on your home for more than what you currently owe. This allows you to get cash out of your home equity. The main benefit of a cash-out refinance is that it usually has a lower interest rate than other types of loans. However, you will have to go through the hassle and expense of getting a new mortgage.
Second mortgage:
A second mortgage is a loan that is secured by your home, but it is separate from your first mortgage. The interest rate on a second mortgage is usually higher than the rate on a first mortgage. However, if you default on a second mortgage, the lender can only foreclose on your home after the first mortgage is paid off. This makes a second mortgage less risky than a cash-out refinance.
Reverse mortgage:
A reverse mortgage is a loan that allows you to tap into your home equity without having to make payments. The money you borrow does not have to be repaid until you die, sell your home, or move out of your home. Reverse mortgages can be a good option for people who are retired or have a lot of equity in their home but not a lot of income.
© 2024, Exuity