When you refinance a first and second mortgage, you need to think about some extra things. Depending on how much equity you have, you may find that when you combine the two mortgages, the interest rate goes up. You might also have to pay PMI if you refinance your mortgage.
Will it help you to refinance?
When you refinance two mortgages, you can combine them into one loan with one payment. This can often lower your monthly bill. You might also find lower rates if you look hard enough.
People with a lot of equity can get the best rates when they consolidate their loans because they have a lot of equity. It is important to look at the interest savings and not just the monthly numbers, which can be misleading.
But if you have less than 25% equity in your home, you may be eligible for higher rates. You will also have to pay for private mortgage insurance if your equity is less than 20%. Even with these things, you may still find that refinancing will save you money.
Have you looked into it?
Look into mortgage lenders to see if refinancing makes sense for you. You can quickly get quotes and terms by going online. Look at the different offers and do the math to decide which one is best. A mortgage calculator you can find online can help you figure out how much your monthly payments and interest will cost.
One simple way to compare costs is to add up how much you pay in interest on both mortgages. Use this number to compare how much interest each possible mortgage would cost.
You also need to think about how much it will cost to refinance. You will have to pay fees and points, just like you did with your first mortgage. You want to make sure that the interest you save can cover these costs.
Why do you want to pay off both mortgages at the same time?
Even though it is convenient to refinance both mortgages at once, you may decide to refinance only one or neither. You can expect to get low rates on your main mortgage.
Most of the time, the rates for a second mortgage will be higher, but you can lock them in. You could also turn your line of credit into a real mortgage. Again, you should look into different financial plans before agreeing to work with a lender.
