Refinancing 1st And 2nd Mortgage Into One Loan
If you currently have two mortgages on your home, you may consider refinancing both mortgages into one loan. This will allow you to make only one monthly mortgage payments. If you got your 1st or 2nd mortgage before the home loan rates started declining, you are likely paying an interest rate that is at least two points above current market rates. If so, by refinancing both mortgages with a low interest rate, you may save quite a bit on your monthly mortgage outgoings as well as having the convenience of one mortgage lender and make only one payment.
Combining 1st and 2nd Mortgages, further benefits people whose 1st and 2nd mortgage is adjustable rate and they would like to fix their mortgage rate. Refinancing both loans at a fixed rate may save you in the long run. Even if your current rates are low, these rates are not guaranteed to remain low. As market trends fluctuated, your adjustable rate mortgages can rise. Higher mortgage rates will cause your mortgage payment to climb considerably. Refinancing both mortgages with a fixed rate will give you peace of mind of knowing how much you will pay every month during the duration of fixed term.
While combining both loans into one mortgage is convenient, and may save you money, there are other issues to consider before going ahead. Refinancing a mortgage involves the same procedures as applying for the initial mortgage. So, there are closing costs and fees to pay. Although many lenders will allow you to add the closing costs onto your mortgage providing you have enough equity in your home, this only means that you will pay for these costs later. In this case, no closing cost at the time of refinancing may not necessarily mean no cost at all. You need to take into account how long you are going to stay in your home. Refinancing is best for those who plan to live in their homes for a long time.
Another issue to look into is your credit score. If it has dropped considerably within recent years, lenders may not approve you for a low rate refinancing. You would better check your credit score before you get the ball rolling. Furthermore, refinancing your two mortgages into one may result in you paying private mortgage insurance (PMI). PMI is required for home loans with less than 20% equity. To avoid paying private mortgage insurance, homeowners may consider refinancing both mortgages separately, as opposed to consolidating both mortgage loans. Get your calculator out and do the math. There are a few additions and subtractions to be made before you reach the bottom line in the refinancing decision. Do not hesitate to look into it in your earliest convenience. If you decide not to refinance after all, then you will probably have a good reason for your decision. That is the right thing to do instead of guessing what is what.
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