Millions of homeowners have taken advantage of the equity in their home and financed second mortgages in the form of home equity loans or home equity lines of credit. In many cases, this secondary loan has helped the homeowner avoid private mortgage insurance or the effect of raised interest rates that were applied to jumbo loans. Loans using equity as collateral have allowed homeowners to complete improvements and renovations to their property, debt restructuring or investments. Combining two mortgages into one may provide a financial advantage to the homeowner as ownership interest value is built in the home.
Is combining mortgage loans a good idea?
Combining mortgage loans can be a positive experience. It is possible for a homeowner to simplify and organize their financial life by completing a mortgage refinance. Combining mortgages allows the homeowner to pay a single, low-interest rate mortgage payment. Whether or not combining first and second mortgages into a single payment is a good idea depends on several factors: How much equity you have in your home, the amount of your second mortgage, the length of time that passed since you secured the second mortgage and the homeowners current credit score. The choice to refinance and consolidate two mortgages can eliminate higher interest loans and save you money.
How to combine mortgages
Homeowners may be able improve their monthly cash flow and increase the amount of discretionary income by consolidating first and second mortgages at a lower loan interest rate. The process should begin with an examination of the current loan terms. Contact the current lender to ensure all costs are included in the calculations when determining the costs of refinancing. There are often fees and costs associated with prepayment of the existing loan. An appraisal of your home or research of the current local housing market can be used in determining the equity in your home. There must be enough equity to pay off the second mortgage when you are combining mortgages. Compare loan rates and fees from a variety of lenders, and apply for the cash-out option loan that includes the amounts necessary to pay off the initial mortgages.
Benefits of combining first and second mortgages
Combining mortgages can save a homeowner money by lowering the amount of monthly payments towards fixed rate mortgage with lower interest rates. Combining mortgage loans can also shorten the life of the loan and remove substantial amounts of interest over time. While there may be costs associated with the refinance, they are typically recovered by the long-term savings and rendered ineffective. Further, interest payments may be tax deductible, making the combination refinance an even more attractive solution to financial and mortgage woes.
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