The decision to refinance a second mortgage should never be taken lightly. Yes, of course it’s one way of acquiring extra cash but it also means acquiring a new loan. You need to make sure that your second mortgage would not just come with surplus cash but better loan rates and terms as well.
Why You Should Refinance with a Second Mortgage
Not every situation would warrant refinancing and not every financial need can be solved with a second mortgage. You need to consider every factor and cost involved in the process before making your decision. Listed below are some excellent reasons that would merit refinancing with a second mortgage.
No More Private Mortgage Insurance
Private mortgage insurance could have been levied on your first or existing mortgage but if you refinance with a second mortgage, you can avoid paying for PMI. Unknown to many, private mortgage insurance is quite a costly expense. You may not notice it because it could already be included in your monthly payments, but PMI can cost you thousands of dollars every year. That’s money wasted and not well-spent!
Consolidate All Mortgages in One Loan
By refinancing with a second mortgage, you can consolidate your existing mortgage and maybe even other debts into one simple loan. Of course, this would only be beneficial if your second mortgage comes with better rates and terms. Shop wisely!
Better Rates and Terms
Had times been especially tough when you acquired your first mortgage? That could be the reason why your current interest rate is unusually high? But today’s market is different and there may be low interest rate mortgages you can now take advantage of. With low interest rates, you’ll be able to ensure lower monthly payments as well.
How about the terms of your current mortgage? Are you satisfied with it? If not, you can refinance using a second mortgage with terms that match your current financial needs. If your first mortgage’s due to expire this year but you haven’t yet enough money for the balloon payment, you can refinance with a second mortgage to settle the last payment and rest easy with a longer loan term.
Cash Out, Cash Back
Last but not the least, refinancing with a second mortgage will give you extra cash. The amount of surplus cash available will of course depend on how much you’ll borrow and the amount you have to pay to settle your existing mortgage.
But that’s not the end of it. If, for instance, you decide to sell your home, you can use part of the proceeds to settle your second mortgage. If you were lucky to get the best refinance mortgage rates then you’ll probably have extra cash once more after closing your loan.
How to Refinance with a Second Mortgage
If you’re convinced about the rightness of refinancing then here’s what you should do to refinance with a second mortgage.
Step 1 Improve or repair credit rating.
It’s the only way to make you eligible for the best mortgage refinance rates. You can do this alone or you can avail of the services of a credit repair company.
Step 2 Shop for rates.
Know which companies offer the lowest rates and what their requirements are in return. Know the costs involved and which of them could be waived in your favor.
Step 3 Apply.
Make sure you read the terms and conditions of your second mortgage before signing up for anything