Compare and review lower fixed rates when second mortgage refinancing that can pays off the adjustable interest rates of credit cards and equity lines of credit. With today's lowered interest rates, refinancing adjustable rate loans and credit lines with a fixed rate second mortgage, taking out a 2nd mortgage to refinance credit cards debt and getting a second mortgage for refinancing student loans has become a popular way of lowering monthly payments through debt consolidation. In most cases second refinance transactions provide quick cash to homeowners. SMO provides "equity loans" for debt consolidation and home improvements. Even if you got the lowest rate at the time, there may be opportunities for you to save by refinancing your current loans.
Many people are attracted to second mortgage refinancing because the interest they pay on these loans can be up to 100% tax deductible. And, the extended loan terms help them save money. Plus, paying down debts, not closing the accounts and not using the credit cards will raise the borrower's credit scores substantially which will put them in a position where they could refinance 2nd mortgage loans and qualify for a better interest rate down the road. Home equity loans or second mortgage refinancing are generally considered more favorable for debt consolidation than home equity lines of credit because it's a lot easier to manage your budget with a fixed-interest-rate loan with payments that don't change through the term of the loan.
We suggest that you look at all your second mortgage refinance options before taking on a new loan that uses your home as collateral. Refinancing a 2nd mortgage allows you to convert your variable rate loans to a fixed rate loan with additional loan consolidation features.
In addition to being useful for debt consolidation, second mortgages are also low-cost credit solutions for financing home improvements. For one-shot improvements like replacing your roof or remodeling your bathroom, a closed-ended home equity installment loan (HEIL) is probably your best bet.
For open-ended projects that require payment to multiple contractors at different times, the flexibility of a home equity line of credit (HELOC) can come in handy. "It's so flexible," says Kellon Tippett, vice president at BB&T Corp.'s direct retail lending division. "You can pay those costs as they come up without having to go back and reapply, so it's relatively cheap for the borrower."
"Arrange the loan first then deal with the contractor," says James Hood, editor-in-chief of Consumeraffairs.com. "Contractors, most of the time, don't fully disclose finance charges." Many times, they get commissions from sub-prime lenders. So, even if you have good credit, you could end up with a high-interest loan wrought with hidden fees that will cost you a lot more than getting a home equity loan through a standard mortgage lender would. James Hood also warns consumers not to pay too much to the contractor prior to starting the job or they could find themselves out of luck if the work is not to their satisfaction.
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