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When you must decide to refinance your first mortgage or get a second mortgage, there are some considerations that might help you choose the right course of action. Much depends on your reasons for wanting or needing funds and your future plans for your home. Do you plan on keeping it long term or do you think you'll sell it in a few years? Will you use these new funds for debt consolidation, home improvements, or another purpose? How long have you had your current first mortgage loan and how advantageous are your terms?
If you have had your first mortgage for some time, now seeing your principal finally declining regularly, you may wish to keep this loan intact and use a second mortgage loan to generate the cash you need. Conversely, should your plans dictate keeping your home long term, the best choice might be to refinance your first mortgage to enjoy the rate (which should be lower than the second mortgage rate), the lower payment (since you can spread it over 30 years instead of 10-15 years), and the need to make only one payment to one lender each month.
With good terms on your first mortgage and needing funds for debt consolidation, you might be better choosing a second mortgage. First, the loans or credit card balances you will be eliminating probably have much higher interest rates than you will pay for your second mortgage. Therefore, the ability to spread payments over 10-15 years while enjoying a possibly much lower interest rate, you might benefit from a second mortgage, which will cost less to apply for and close.
The same logic would apply to a need for home improvement funds, particularly if you do not plan to keep the home for the long term. It may be cheaper, faster, and more convenient to just get a second mortgage, knowing that the value of your property should increase since you are spending money to improve it. Conversely, if you plan on keeping your home for the foreseeable future, refinancing your first mortgage, while costing more to close the loan, will save you interest rate cost over time, and require only one monthly payment.
The best advice is to analyze all the factors present in your current financial situation and future plans for your home. If you spend some quality time considering all the pieces of the puzzle, they should finally come together to form the correct picture, showing you the best choice, refinancing your first mortgage or adding a second mortgage to accomplish your goals.