Second Mortgage vs RefinanceMortgage vs. refinancing
Consolidation of debt with cash out refinancing
However, the most important determinant of whether a second mortgage consolidating debts or a re-financing using liquid funds is less expensive is the actual interest compared to the interest on the first mortgage. A disbursement refinance is probably better if the present price is lower, as the new first mortgage may have a lower interest payment interest rat than the old one.
In contrast, with higher interest currently available, a second mortgage is likely to be less expensive. The interest and points you have to owe to refinance the first mortgage versus the same cost of a second mortgage. Any mortgage liability for the new first mortgage.
The interest rates, the mortgage coverage and the residual maturity of the first mortgage. This is the phrase you choose for the new first one compared to the phrase you choose for the new second one. The interest that you can earned on your saved time. Its also shows a balanced interest on the second mortgage - the highest interest you can afford on the second and comes out before the refinancing options.
A second mortgage is the cheaper choice if it is available at an interest below the break-even interest will. You' ve got a first mortgage of $140,000 and you need $50,000. Most of the mortgage refinances have an mean life of a few years, so I assume you bought yours two years ago, at 7 per cent for 30 years, without mortgage insure.
New $190,000 loans plus processing fees requires mortgage protection. I assume that the policy will be continued for the whole 5 years that you are expecting to stay in your home. A new first mortgage would be for 30 years at 8. 25% and a point. Second mortgage for $50,000 plus cost would be for 15 years at 11.
For the second mortgage, the break-even point is 18. 25%, well above the 11.5% for the second one. About 5 years would be the second 11,361 dollars less expensive than funding the first. Sample 2 is the same except that I suppose you can buy a 15-year maturity for the new first mortgage payout.
Breakeven on the second would decrease to 16. 86%, and cost-cutting on the second would decrease to $8,982. Breakeven on the second mortgage would be 14. 98%, and the saving would be $8,230. For example 4 is the same as 3, except I suppose that your home will grow by 5% per year, which will lead to the end of mortgage coverage for the new first mortgage after 18 month.
Breakeven on the second would decrease to 13. 21%, and the saving to $4,021. For example, Example 5 goes one better and suggests that increasing the value of your home completely removes the need for mortgage protection. On the second day, the breakeven point would go down to 12. Forty-one percent and the saving to $2,138.
Obviously, those borrower who bought a mortgage a few years ago at interest levels well below the actual mortgage price will probably do better to take out a second mortgage than to refinance. However, older higher-interest mortgage loans may be a different matter. Breakeven would be 9. 98%, or below the interest on the second, and the refinance would give you $2,467 over 5 years saving on the second.
Applying the hypotheses of example 5 to the 10% mortgage, the break-even would be on the second 3. 81% and the saving from funding would be $17,106.