Details about Refinancing a Second Mortgage

Details about Refinancing a Second Mortgage
by: Allan Young


According to the Mortgage Bankers Association, 2009 will see the amount
of mortgage refinances rise from about $850 billion to over $1.9
trillion. While most of those refinanced mortgages will be primary
mortgages, there are many good reasons to consider refinancing a second
mortgage on your home. If you are making payments on a second mortgage,
also referred to as a home equity loan, refinancing could save you a good
deal of money on your loan repayment.

Why Refinance a Second Mortgage?

The reasons for refinancing a second mortgage are no different than the
reasons for refinancing a primary mortgage. When refinancing a second
mortgage you can potentially lower monthly loan payments, get into a
fixed rate loan from an adjustable rate loan, shorten the term of your
loan, and even get cash back at the closing. In addition to these
reasons, refinancing for a second mortgage also helps to combine your
first and second mortgage into one loan, so that you will have only one
payment to make. Refinancing for a second mortgage can also help to get
rid of private mortgage insurance. It is most important to know that
refinancing for a second mortgage is essentially the same process as
refinancing for your primary mortgage.


Does Refinancing Your Second Mortgage Make Sense?

There are many factors to consider when deciding whether or not to
refinance a second mortgage. Before you apply for a loan, you should
carefully weigh the costs versus the benefits, to see if it makes
financial sense for you. In order for a mortgage refinance to make sense,
most financial experts suggest that you follow some basic rules of thumb:

- A mortgage refinance may be a good idea if the interest rates have
dropped at least one percentage point below your current second mortgage
rate.

- A mortgage refinance only makes sense if you plan to remain in your
house for at least four more years.

- The costs of taking out a new loan plus any penalties for early
repayment of your old mortgage are less than your savings if you
refinance.

- Your financial circumstances have changed enough that you can qualify
for an interest rate that is at least one percent lower than your current
second mortgage interest rate.

How to Refinance a Second Mortgage

Before you decide on a second mortgage, you should first assess your own
financial health. Check your credit report to be sure that it accurately
reflects your current circumstances. If there are inaccuracies or
discrepancies on your credit report that may lower your credit score,
contact the credit bureaus to have the situation dealt with and removed.

If your credit is shaky, do what you can to rehab your credit score. Try
to pay off credit card balances as much as you can, and bring all of your
accounts to current standings. In certain cases, you may have to resolve
to make regular payments on all of your accounts for several months
before actually applying for a mortgage refinance loan.

You also want to decide what your aim is for refinancing your second
mortgage in order to figure out what kind of new loan to seek. For
example, if you want to lower your monthly payment and save money on your
overall mortgage, look for a mortgage refinance with a lower interest
rate. If you want to lower your monthly payment but the overall mortgage
is not important to you, try to refinance into a longer term second
mortgage. If your intent is to pay off your mortgage more quickly, look
for a mortgage with a shorter term. Your monthly payments will be larger,
but you will save a considerable amount of money over the life of your
loan. Lastly, if you want to combine your primary and second mortgage,
look for the lowest interest rates and shortest term that you can afford.

You will also want to get loan quotes from several lenders in order to
find the best deal. You do not have to refinance your current second
mortgage with the original lender, although your current lender may offer
you the best terms. Since each lender has their own criteria for
approving loans and deciding on interest rates, the loans that you are
offered can vary by as much as a full percentage point. It is to your
benefit to shop around and compare several different loan quotes. Not
only will you have a wider variety of choices of loans, but you will also
have bargaining power if you choose to negotiate with a particular loan
company.

Lastly, you want to choose the best second mortgage refinance loan that
you are offered. Once you have all of your loan quotes in line, compare
them carefully to choose the best one for your needs. Be sure to count in
the closing costs and any special incentives offered by the various loan
companies into your calculations. When you have made your choice, contact
the winning lender and finalize the arrangements for your mortgage
refinance.

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About The Author
Allan Young is a freelance writer who writes about mortgages and home
ownership, often discussing a specific aspect of owning a home such as
refinancing home mortgage .

The author invites you to visit: http://www.absolutemortgageco.com