Refinancing both your first and second mortgage will lower your
monthly mortgage payment and qualify you for overall lower
rates. It will also save you money on closing costs and
application fees. And while you are looking at rates and terms,
you can reevaluate your loan's payment schedule to better fit
your budget needs.
Why One Mortgage Is Better Than Two
Lending companies prefer financing one total mortgage rather
than two separate loans. So second mortgage rates are at least a
point higher than first mortgage rates.
Refinancing your two mortgages into one will qualify your for a
lower rate mortgage. Since lenders charge flat application fees,
you will save money by going through the process only once.
Closing costs can also be cheaper.
Readjusting Terms
In all likelihood, your mortgages have different terms.
Refinancing is a good time to reevaluate those terms and decide
what would best meet your budget concerns.
If lower payments are your concern, then choose a longer term.
While this will increase your total interest costs, it will ease
your immediate budget concerns. Then when your financial
situation improves, you can make principal payments to offset
the interest costs.
When concerned about interest costs, it's best to opt for a
shorter term with its lower rate. You can also pay points to
further lower your rates. But this is only wise if you plan to
keep the loan for several years in order to recoup the costs.
Separate Is Sometimes Better
In some cases, it is better to keep two separate mortgages to
save money. In some instances, refinancing your mortgages
individually will get you better rates overall. This is
especially true if your total mortgage principal equals more
than 80% of your home's value.
If you plan to cash out part of your home's equity while
refinancing, you may also want to finance a second mortgage
separately. Cash out refi loans automatically boost your loan's
rate.
In order to find your best option, request quotes for
refinancing your mortgages together and separately. Also look at
several different lenders to be sure you are getting the most
competitive offer.
About the author:
Carrie Reeder offers advice about
Refina
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