Everyone talks about refinancing when buying another property.
What is the advantage over refinance as opposed to obtaining a 2nd mortgage? I thought a second mortgage would be better as it does not increase your loan repayments – only obtains additional equity as security for deposit. OR Am I missing something altogether?
Everyone talks about refinancing when buying another property.
What is the advantage over refinance as opposed to obtaining a 2nd mortgage? I thought a second mortgage would be better as it does not increase your loan repayments – only obtains additional equity as security for deposit. OR Am I missing something altogether?Hi Essykay,
To the best of my knowlege, there are 3 traditional methods (not including creative financing) to access equity in one property in order to leverage into another property.
1) Refinance – which you have mentioned. Useful if your origional institution is not compeditive in a relative sense, or cannot provide the type of product you need. It can also be useful for cross-linking of properties etc.
2) An additional loan (or top up) Usually less costly than a refiance, as you are just adding to your loan & not creating a new one.
3) A second mortgage- not usually the preferred choice as interest rates are not usually as compeditive as a first mortgage.
By accessing the equity in your property, you are borrowing more against it, and hence there will be associated payments with the extra borrowings.
Depending on your needs/ strategies/ position each of these are viable alternatives, but if you are borrowing money you have to service the debt in some way. If you have found a way around this I would be very interested.
Cheers,
Nathan[
]Hi Essykay,
A second mortgage increases your payments. It is a second loan against the property at a higher rate of interest.
Of the options shown by Nathan, the cheapest is to increase (up-stamp) your existing mortgage to access any incresed equity. There should only be State stamp duty to pay.
To re-finance means to create a new loan to pay out the old. There are exit costs from your existing mortgage; application fees and new stamp duty to pay on the full amount of the new loan. You refinance if the total package works out cheaper than other alternatives (e.g. if you can obtain lower interest rates).Terry
FinanceSaskatoon
it is my understanding that once stamp duty is paid on a loan if you have it refinanced you are not liable for stamp duty a second time; as a loan on the security (the property) has already been stamped.
Anyone else have any clarity on this ??
the B [
]it is my understanding that once stamp duty is paid on a loan if you have it refinanced you are not liable for stamp duty a second time
Hi the B,
The awnser is yes and no! It all depends on the way your refinance is handled. This is usually in the hands of the solicitors of the new institution. Some of them will ‘transfer’ the stamp duty to the new mortgage, while others do not, leaving you to pay it a second time.
Make sure that you ask this of your financier when considering a refinance. Good financiers will arrange the discount for you[
][].Happy borrowing & investing!
Cheers,
Nathan.
]
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