What’s the difference between refinancing and mortgaging a second time?

One Response to “What’s the difference between refinancing and mortgaging a second time?”

1. doreen k says:

   October 20, 2010 at 3:53 am

   When you refinance, you pay off completely the original mortgage and start over with a new loan. In some cases, you can request “cash out” in a refinance, assuming there is enough equity to allow you to do so. Since you’re new to this, here is an example.

   The house was purchased for $100,000 and the original loan was for $80,000. The home is now worth $200,000. If the owner refinanced, they could possibly get a lower rate mortgage and another $80,000 or so in cash.

   When you mortgage for a second time – I assume you mean to get a second mortgage – you are leaving the original mortgage as is and taking on a second loan using the house as security (same as collateral). A second mortgage is also commonly called a home equity loan or home equity line of credit. A home equity loan is usually for a fixed amount with a specific repayment term and does not allow subsequent draws. A home equity line of credit is a revolving line that the homeowner can draw on at any time for any amount during a ten or fifteen year draw period. After the draw period, the home equity line of credit goes into repayment and no more draws are allowed. But, most people end up selling or refinancing before the draw period is over.

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