Question:

How should a borrower read the cash-out refinance rates vs second mortgage rates?

Answer:

Cash-out refinance rates vs second mortgage rates can be difficult to understand and compare especially if you are a first time home buyer. Even for an experienced borrower it may be difficult to analyze different rates offered for a cash-out and for a second mortgage if they do not have a clear idea about how much cash they want and what this money will be used for. If you simply need $20,000 for a one-time urgent payment, it may be simpler to go with a second mortgage no matter how is the second mortgage APR compared to cash-out refinance rates.

If you need a total change of rates and seek much lower monthly payments (if your current mortgage was locked in on much higher rates and now rates are abruptly lower) you should consider a cash-out refinance even if you do not plan to go after the bag of cash. You may simply like to benefit from the cash-out refinance rates without utilizing the cash option to the full (or at all). In this case you will have to compare the first mortgage APR and the cash-out refinance APR, since the cash-out has significant closing costs.

In the case you are experienced in utilizing real estate equity as a source of cash or are capable of managing mortgages with the purpose of expanding your portfolio of investment properties, you probably have no interest in second mortgages at all.

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