Your Refinancing Options If You Have Two Mortgages
By David Faulkner
There are many homeowners who, for a variety of r4easons, are carrying two mortgages on their homes. While the additional mortgage may have been assumed as a matter of necessity during a financial bind, meeting the additional mortgage payment month after month can strain a budget to the breaking point.
So with the recent drop in interest rates, thousand of homeowners carrying two mortgages have decided to refinance, hoping to combine both earlier mortgages into a single loan at a better interest rate. But what many homeowners in this situation do not realize is that they may be in better shape if they decide to refinance only their second mortgage.
When It’s A Good Idea To Refinance
If deciding to refinance one or both of your home loans will help you lower the amount you are paying in mortgage payments each month, you should do it. But a refinance loan must have a lower overall interest rate than the average of the interest rates on your two existing loans in order for it be a good refinancing option.
If one of your current mortgages already carries a low interest rate, you should only refinance it if you can match or better the rate with your new loan. Otherwise stick with refinancing only the one with the higher rate.
When considering whether or not to refinance, you should decide what you hope to accomplish. Besides lowering your interest rate, refinancing can let you shorten the term of your loan, decreasing the total you will pay over its lifetime.
The costs associated with a refinancing loan are small to nonexistent. But there is a cost, usually between two and four percent, for refinancing a first mortgage, while there is usually none for refinancing a second. So you will have to consider that when deciding on your refinancing options.
Do Some Comparison Shopping
When you are looking for your refinance options, you should not simply try to find the cheapest one. Your best bet to find the loan which will work in your situation is with your current lenders. Deciding to refinance with them will greatly reduce the need for paperwork, and may even eliminate your closing costs.
But doing some comparison shopping for your refinancing options is always recommended, simply because when you know what is available to you in the way of interest and terms, you will be in a much better position to bargain if you decide to approach your current lender.
You don’t need to spend a lot of time visiting your area lenders in search of your refinancing options. If you have Internet access, you will be able to shop for, and even apply for, online loans and obtains quotes to use as bargaining chips.
Your existing lenders will naturally be motivated to keep your business, rather than have you pay off your loans with them and start making payments to someone else. So don’t be afraid to negotiate. You and your lender should be able to come to an agreement which will be satisfactory to both of you.
