If you are carrying a second mortgage on your home refinancing may be in your best financial interest. If the hassle of dealing with two banks, the cost of having private mortgage insurance, or a higher rate are concerns to you it may be worth considering second mortgage refinancing. A loan officer may give you biased advice so look at the facts to see what makes sense for you.
Is it a hassle for you to write two checks each month to two different banks? For many people the simplicity of dealing with one lending institution is a great convenience. Building a relationship with your primary lender can have additional benefits too. You may be able to avoid extra fees or negotiate extensions should you need them.
Are you paying for private mortgage insurance (PMI)? This is typically 0.5% of your mortgage loan each year. If you have a $200,000 mortgage that means you are paying about $1,000 annually for PMI. Lenders usually require mortgage insurance if you do not have enough of a down payment at the time you purchase your home. If you have made several mortgage payments or the value of your home has increased you may be able to eliminate the need for PMI and save yourself money each month by doing a second mortgage refinance.
Is the interest on your second mortgage too high? Did you get an adjustable rate mortgage that is going to significantly increase soon? When you are trying to get into your home sometimes a second mortgage with an unattractive interest rate is your only option. However, once you have paid your bills on time and established some equity in your home you may be able to refinance at a much lower rate. Today's rates are much better than they were just a few years ago. The savings could be substantial.
Second mortgage refinancing is not for everyone. It may be necessary to continue carrying two loans even with an inflated interest rate if that is the only way you can stay in your home. But if you want some convenience, have some additional equity, or qualify for a better rate you can save by combining your mortgages or refinancing. Do some research and get the facts. A few hours of reading and discussion your options could pay off in lower payments each month.
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When is the best time to apply for a fixed rate mortgage? What are adjustable rate mortgages based on? Should you opt for a 15 or 30 year mortgage? What are the advantage of FHA loans? And should you use a broker or bank? We answer these and other questions in short easy to read articles written without "mortgage speak".
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