Deciding Between Second Mortgages vs. Cash-Out Refinance vs. Selling Property Outright
When you’re ready to access the equity in your home, you have three main options: take out a second mortgage, get a cash-out refinance, or sell the property outright. Each option has its own set of considerations, so it’s important to understand all three before making a decision.
Second Mortgage vs. Cash-Out Refinance vs. Selling Property Outright
If you’re looking to access the equity in your home, you have three main options: take out a second mortgage, get a cash-out refinance, or sell the property outright. Each option has its own set of considerations, so it’s important to understand all three before making a decision.
Second Mortgage
Taking out a second mortgage is one way to access the equity in your home. With a second mortgage, you’ll get a lump sum of money that you can use for whatever you want.
There are two types of second mortgages: home equity loans and home equity lines of credit (HELOCs). With a home equity loan, you’ll get a fixed amount of money all at once, and with a HELOC, you’ll get a line of credit that you can draw from as needed.
Pros:
– You can use the money for anything you want
– Interest rates are typically lower than credit cards or personal loans
Cons:
– You’ll have two monthly payments (one for the first mortgage and one for the second mortgage)
– If you have a variable-rate second mortgage, your interest rate could increase and make your monthly payments more expensive
Cash-Out Refinance
A cash-out refinance is another way to access the equity in your home. With a cash-out refinance, you’ll replace your existing mortgage with a new one that’s for a higher amount, and you’ll get the difference in cash.
For example, let’s say you have a $200,000 mortgage with a $160,000 balance. You could do a cash-out refinance for $240,000, which would give you $80,000 in cash. You’d then use that cash for whatever you want.
Pros:
– You can use the money for anything you want
– Interest rates are typically lower than credit cards or personal loans
– You’ll only have one monthly payment (for the new mortgage)
Cons:
– If you have a variable-rate mortgage, your interest rate could increase and make your monthly payments more expensive
selling property outright
Selling your property outright is another way to access the equity in your home. With this option, you’ll sell your home and use the proceeds for whatever you want.
Pros:
– You can use the money for anything you want
Cons:
– You’ll have to find a new place to live
– You may have to pay capital gains taxes on the sale of your home
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