Both options can allow you to access home equity, but they affect your existing mortgage differently. A second mortgage adds another loan while leaving your first mortgage in place. You therefore continue making payments on the original mortgage and make separate payments on the second loan. A cash-out refinance replaces your existing first mortgage with a new, larger mortgage and gives you the difference between the old balance and new loan amount as cash, subject to applicable requirements. The better choice can depend heavily on your current mortgage rate. If your existing first-mortgage rate is attractive, keeping it and using a second mortgage may be worth considering. If refinancing can provide favorable new terms, cash-out refinancing may be more appropriate. Compare the two options carefully in terms of rates, fees, payment structure, and total borrowing cost. Our guide on second mortgage vs. refinancing provides more context.
