How to Refinance a Second Mortgage

How to Refinance a Second Mortgage

Though refinancing may not be right for everyone, if you have a second mortgage on your home, you may want to consider refinancing.

Learn about mortgage options.

The decision to refinance must be based on your individual situation and needs. For some homeowners, it is a good financial move, and for others, it's not. It simply depends on how much you owe on your home, how much the home is worth, and whether or not you plan to stay in the home for a significant period of time. The type of loan terms, cost of the refinance, and the reasons behind it should also factor into your decision.

Good reasons to refinance a second mortgage include:

• To get rid of private mortgage insurance, which can be costly and unnecessary.
• To combine your first mortgage and second mortgage into one loan and one convenient payment.
• To get a better interest rate.
• To lower your monthly payments.
• To change the current term of your loan to match your current financial situation.
• To take advantage of cash-out refinancing and get cash back at closing.

Again, the decision to refinance should be based solely on your individual situation and needs. Before signing any papers, you should be confident and satisfied with your decisions. Once the paperwork is completed, there may be no going back.

If you are not sure exactly how to refinance a second mortgage, the step-by-step instructions shown below should help:

Step One:

Determine whether or not refinancing is in your best interests financially. Run some figures yourself or use one of the many mortgage calculators that can be found online.

Step Two:

Make sure you are in a good financial position. Start by pulling your credit report. If you find any mistakes, dispute them immediately. If there is negative information on your report that may be dragging down your credit score, do your best to get it fixed. Then, add some money to your savings account. There may be closing costs associated with your refinance. You will need to have money in your account if you want to show the lender that you can cover the charges.

Step Three:

Find at least three lenders who can offer you information on how to refinance a second mortgage using one of their programs. Get rate information and details about loan terms and lending fees.

Step Four:

Use your findings from step three to make comparisons. Choose the loan that best meets your needs and desired terms. If you are not satisfied with any of the loan offers, repeat step three.

Step Five:

Look over your loan paperwork and determine how much money you will need, if any, for closing costs. If you have questions about the terms of your loan, now is the time to ask.

Step Six:

Before signing anything, take time to look over the terms of your refinance once more. Make sure that you will be able to make the required payments and find out exactly what will happen if you can't. If you are happy with everything, sign on the dotted line and begin enjoying the benefits of your refinance.

Additional Tips for How to Refinance a Second Mortgage

Now that you know how to refinance, here are some refinancing tips that will help you through the process for a second mortgage:

• Try to negotiate with the lender to see if some of the fees associated with your refinance, such as the appraisal and title fee, can be waived.
• Do not accept the first loan offer that you receive. Instead, take time to shop around and make comparisons.
• Get the lowest interest rate possible. The more interest you pay, the more your monthly payment will be.

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