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Comparing Second Mortgages to Credit Card Rates

When consolidating debt, we recommend considering second mortgage loans versus using a credit card. A mortgage carries simple interest and the credit cards use compounding interest that can put you in debt quickly.  An equity loan or second mortgage is a fixed rate loan or a variable rate line of credit that is in second position on the property’s title.  Second mortgage loan amounts approved by lenders are typically determined by calculating the difference between what you owe on your house and the estimated value of the house.

In most cases, these types of home equity loans do not require borrowers to pay significant lending fees. Many homeowners are reluctant to refinance their first mortgage because most refinance lenders charge $3,000 to $5,000 in closing charges and most homeowners already have a great interest rate between 4 and 5%.

Consolidate with a Second Mortgage

In most cases, second mortgage rates are bit higher than to prime mortgage rates available when refinancing on first mortgage liens.  However, home equity loan rates are drastically lower than credit card rates and the terms for credit cards can change without your consent.

Posted in 2nd Mortgage Tips.

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