Weighing the Risks of 2nd Mortgages [mortgageinsurance-101.blogspot.com]
Question by s s: Where is a mortgage calculator whcih shows whether I should refinance? Where do I find a calculator that shows whether it is worth paying a penalty ($ 2700) to break my existing mortgage(4.71%with 2 yrs left to go with a lower rate (3.55%)? Best answer for Where is a mortgage calculator whcih shows whether I should refinance?:
Answer by Steve D
You have two years left to pay on a mortgage and you want to refinance? In addition to the penalty for early payment, don't forget that there will be closing costs attached to the re-finance. Right ow, you are paying mostly principal on your current mortgage. Any savings you see in your monthly payments will probably be offset by the additional interest you are going to pay by extending the new mortgage to 5, 10 or 30 years.
Answer by Ben
For calculators on mortgages, try bankrate.com They have all kinds of calculators and information, including info on how to figure out when it is worth refinancing. (does "2 yrs left to go" refers to when you don't have to pay a penalty? If you have many years to go on your mortgage, consider getting a fixed rate if you think interest rates may go up in the future...) You can even comparison shop for mortgages on bankrate.com.
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Many home owners who find themselves in financial crisis consider 2nd mortgages to attain immediate funding. 2nd mortgages are a refinancing alternative. Obtaining a second loan is a way to restructure and consolidate debt. The borrower should always carefully consider all options before committing to a second loan.
2nd mortgages allow the borrower to access the home's additional equity. The property secured by the primary mortgage also secures the second mortgage. In the event of a default any lender can place the property in power of sale. However, 2nd mortgages are considered a higher risk for lenders than those of first mortgages. Therefore when and if a default occurs, the first mortgage takes precedent over the second mortgage. This typically results in higher interest rates on a second mortgage. Although 2nd mortgages are considered to be more of a risk than first time loans, the risk is still less than those of credit cards.
In turn the interest rates are also typically lower than the interest rates on credit cards.There are some disadvantages when obtaining 2nd mortgages. The main disadvantage is that the borrower is putting their home at risk by attaining one. If the borrower becomes unable to make payments, a second mortgage can be catastrophic. 2nd mortgages also usually have hefty second mortgages fees. These fees often depend on how much funding the borrower wants to access and how long it will take to pay off the loan. For this reason it is imperative that the borrower understands and weighs all risks, before committing to a final contract agreement. By ensuring that the payment on the second mortgage will still be affordable even with higher rates, borrowers will greatly reduce the concern for default and the consequences that follow.
This will also give the borrower's budget adequate room for small changes in income.When a home owner is looking to attain a second mortgage, the best place to start is with the lender of the first. By doing this, it is likely that the borrower can save money on fees and interest rates. The lender is able to look at past payment history of the primary loan. If the borrower has made payments each month and in a timely manner, this shows that the borrower is less of a risk and the lender may reduce some of the fees. In attaining 2nd mortgages, getting all necessary information to make an informed decision is the best approach.
