APR as Decision Factor

A cash-out refinance or second mortgage decision situation is one instance where you should ignore the annual percentage rate (APR). This is because the APR does not consider the rate on the old mortgage that you are refinancing.

You may reach the erroneous conclusion that the cash-out refinance is the better option of the two if the rate on your old mortgage is less than that on the second mortgage. The reason for this is that you would have neglected to take into account the loss of the lower rate. 

A good calculator can help you decide on the better option between a second mortgage and a cash-out refinance.