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Second Mortgage versus Refinancing

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Compare rates from up to 4 lenders for refinancing loans.

A second mortgage is any loan that involves a second lien on the property. Some second mortgages are for a fixed dollar amount paid out at one time, in the same way as a first mortgage. As with firsts, such seconds may be fixed-rate or adjustable-rate.

Every homeowner in need of extra cash faces this question. To answer it, you must consider several factors, including:

  • The interest rate and points you have to pay to refinance the first mortgage, compared with the same costs for a second mortgage.
  • Any mortgage insurance requirement on the new first mortgage.
  • The interest rate, mortgage insurance, and period remaining on the term of the existing first mortgage.
  • The term you select on the new first relative to that on the new second.
  • The amount of cash you need.
  • Your income-tax bracket.
  • The length of time you expect to remain in your home.
  • The interest rate you can earn on savings.
The second mortgage is the less-costly option if it is available at an interest rate below the break-even rate.