Second Mortgages and HELOCs
Frequently Asked Questions
Straight answers to the questions we hear most.
Yes, you can. “Clear to close” is not a legally binding commitment from you; it means the lender is ready to finalize the loan. You can still switch, but the risks of delay and complications are at their highest at this stage.
APR, or Annual Percentage Rate, is a broader measure of your loan’s cost than the interest rate alone. It represents the annual cost of your mortgage, expressed as a percentage, and includes the interest rate plus other lender fees and charges.
Yes, when a lender calculates your back-end DTI to qualify you for a mortgage, they will include the estimated total monthly payment (PITI - Principal, Interest, Taxes, and Insurance) of the new home loan you are applying for in the “debt” side of the equation.
A Home Equity Loan provides a single, lump-sum payment upfront, which you repay with a fixed interest rate and consistent monthly payments. A HELOC works more like a credit card, giving you a revolving line of credit to draw from as needed during a “draw period,“ typically with a variable interest rate. You only pay interest on the amount you’ve actually borrowed.
The main benefits of a mortgage recast include:
Lower Monthly Payment: The most direct benefit is a permanent reduction in your monthly mortgage payment.
Low Cost: The fee for a recast is typically minimal, often between $250 and $500, far less than refinancing closing costs.
Keep Your Low Rate: If you have an existing low interest rate, a recast allows you to retain it.
No Credit Check: Since you are not applying for a new loan, your credit is not pulled.
Simple Process: The procedure is straightforward with much less paperwork than a refinance.
Lower Monthly Payment: The most direct benefit is a permanent reduction in your monthly mortgage payment.
Low Cost: The fee for a recast is typically minimal, often between $250 and $500, far less than refinancing closing costs.
Keep Your Low Rate: If you have an existing low interest rate, a recast allows you to retain it.
No Credit Check: Since you are not applying for a new loan, your credit is not pulled.
Simple Process: The procedure is straightforward with much less paperwork than a refinance.
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