Thursday, November 15, 2007

1st and 2nd Mortgage Refinance Loan - Why Refinance Both Mortgages?

The fuss of making two monthly mortgage payments have prompted many homeowners to see refinancing their 1st and 2nd mortgages into one loan. While combining both loans into one mortgage is convenient, and may salvage you money, homeowners should carefully weigh the hazards and advantages before choosing to refinance their mortgages.

Benefits Associated with Combining 1st and 2nd Mortgages

Aside from consolidating your mortgages and making one monthly payment, a mortgage consolidation may lower your monthly payments to mortgage lenders. If you acquired your 1st or 2nd mortgage before home loan rates began to decline, you are likely paying an interest rate that is at least two points above current market rates. If so, a refinancing will greatly profit you. By refinancing both mortgages with a low interest rate, you may salvage 100s on your monthly mortgage payment.

Furthermore, if you accepted a 1st and 2nd mortgage with an adjustable mortgage rate, refinancing both loans at a fixed rate may profit you in the long run. Even if your current rates are low, these rates are not guaranteed to stay low. As market tendencies fluctuated, your adjustable rate mortgages are free to rise. Higher mortgage rates will cause your mortgage payment to climb up considerably. Refinancing both mortgages with a fixed rate will guarantee that your mortgage stays predictable.

Disadvantages to Refinancing 1st and 2nd Mortgage

Before choosing to refinance your mortgages, it is imperative to see the drawbacks of combining both mortgages. To begin, refinancing a mortgage affects the same processes as applying for the initial mortgage. Thus, you are required to pay shutting costs and fees. In this case, refinancing is best for those who be after to dwell in their homes for a long time.

If your credit score have dropped considerably within recent years, lenders may not O.K. you for a low rate refinancing. By refinancing and consolidating both mortgages, be prepared to pay a higher interest rate. Before accepting an offer, carefully compare the savings.

Moreover, refinancing your two mortgages may ensue 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 see refinancing both mortgages separately, as opposing to consolidating both mortgage loans.


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