Difference between the Second Mortgage and Refinance

Difference between the Second Mortgage and Refinance

Whenever you go to buy a home you must have mortgage loan for the purchase of the property or home. This mortgage is called primary and first mortgage loan. You want to take another mortgage loan on the same property subordinately which is called second mortgage or subordinate mortgage but when you like to take advantage of a best interest rate and consolidate your all loans you can choose a refinancing mortgage loan of the current loan. The refinance will actually change or replace the primary mortgage loan with a debt compulsion under different terms of loan. So the refinance is replacement of the existing loan with a new loan and the second mortgage is an additional loan on the same property along with the existing loan.

The main difference between the second mortgage and the refinance is increasing the liability. The refinance is the different loan with same balance due but the second mortgage is a new loan burden for the borrower. On the other hand second mortgage will not reduce the chance of foreclosure but the refinance will reduce the chance of the foreclosure. The refinance will help to reduce your monthly expenditure by reducing interest rate but the second mortgage will charge a very high rate of interest for its risky nature which makes your monthly payment high along with payment for the first mortgage. To get the second mortgage loan you will in need of enough home equity but to refinance your mortgage you require no home equity.

The both are the different type of loan to beneficial for the borrower. In this both loans you can pay off the other unsecure debts out of the extra cash on second mortgage home equity loan and consolidation option of the refinancing.

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