Refinancing Second Mortgages

By refinancing second mortgages, homeowners can often tap into the equity in a home and meet financial needs. Home equity can provide a number of funding possibilities to property owners. When a property is purchased, the buyer, assuming that they are not in the position to pay cash, will take out a first mortgage. This loan serves as the initial funding that make the property purchase possible. Once a home has attained an amount of equity, a home owner can apply for an additional mortgage that borrows against the equity. As interest rates and terms change, home owners often consider refinancing second mortgages. Whatever option is chosen, property owners should take care to make sure that they are not placing their home at risk by assuming payments that they cannot afford to make. In some cases, deciding to refinance the original mortgage can be a wiser course of action than pursuing secondary funding. Of course, each individual situation can present its own pluses and minuses.

Whenever a homeowner is considering refinancing second mortgages, they should take a number of things into consideration. To avoid private mortgage insurance, a borrower would be wise to make sure that any money that is borrowed against the house does not exceed eighty percent of the value of the home. As home values plummet, this eighty percent figure can obviously change. A possible solution could be to take out two loans, one that will cover eighty percent of the home's value at a lower interest rate. The other loan, which will generally be regarded as a second mortgage, may come at a higher interest rate, but will cover the remaining twenty percent of the debt. This approach will save the borrower the expense of private mortgage insurance. By refinancing second mortgages in this manner, home owners can benefit from significant savings. Frequently, by handling the home debt in this manner, a borrower can pay out less per month than when obtaining a single mortgage.

In the case of a home that has increased greatly in value, the options that are available to the home owner can greatly open up. Rather than refinancing second mortgages and continuing to carry two separate loans on a property, a home owner might be better off just combining all the debt into one mortgage. This approach can be much more cost effective, particularly if a borrower is able to qualify for a reasonable interest rate and as long as any closing costs and fees that are associated with the loan are not too high. One possibility that could make this option an unreasonable one would be if the home owner does not think that they will be living in the property for a long period of time. If there are plans to sell the property in the near future, pursuing any kind of refinance option would probably not be wise. The Bible talks about the wisdom of trusting in the love of Christ. "Who shall separate us from the love of Christ? Shall tribulation, or distress, or persecution, or famine, or nakedness, or peril, or sword?" (Romans 8:35)

When a homeowner is carrying two mortgages but does not have any equity in the property, or owes more than the value of the property, limitations can exist. For example, a home owner who has a secondary mortgage that causes the borrower to have more debt in a property than the home's current value may have a difficult time should they decide to refinance the first home loan. To refinance the original debt, the first mortgage must be paid off. When this happens, the secondary loan then becomes the primary loan on a property. To pay off the balance of this debt, a new secondary mortgage must be negotiated. Obtaining a loan that exceeds the value of the property in question is generally next to impossible. Of course, a lender may agree to work around these road blocks, but many home owners can find themselves in a difficult position. Looking into refinancing second mortgages might be an act of futility for home owners who face this situation. In general, when too much debt is attached to a primary place of residence, a consumer could be putting their home at risk. A wise home owner will work toward paying down the debt that is attached to their place of residence whenever possible rather than increasing this debt.

One of the best reasons to consider refinancing second mortgages could be to eliminate monthly private mortgage insurance payments. These payments can be quite costly and can certainly add up over time. Making payments on a primary house loan in addition to a secondary one can become a financial drain. If the indebtedness can be rolled into one source of financing, this can result in a reduction of monthly expenditures for the home owner. Often, a consumer may be able to obtain a much better interest rate through a successful refinance. As financial circumstances change, lending needs can change as well. Reworking a secondary or primary mortgage can help the consumer adapt to such changes. Cash out financing can be an attractive option for some consumers, providing incentive for refinancing since the borrower can obtain needed funds when the loan closes. A wise consumer will check into their own financial situation before moving forward with any kind of refinance option. Careful comparison shopping is also a necessity when refinancing second mortgages. Lenders can offer a huge variety of terms and rates and the borrower should always take pains to make sure that they are getting the best terms possible.

Add to: File Insurance Business article Teen Photo Images