Timing the refinancing of your second mortgage is just as important as
finding low rates and fees. Before you decide to refinance, make sure
that you have a clear benefit. Either save money with lower rates or
protect yourself with the security of a low fixed rate second mortgage.
When Lower Rates Equal Savings
Lower rates can equal savings if you have enough time to recoup any
closing costs or other fees. In most instances, a point drop of two
percent or more with seven years left on the loan makes it cost efficient to
refinance. To see if this is true in your case, compare what you are
paying now with the potential payment of a new mortgage.
Combining both your first and second mortgages will further reduce your
rates and save on application fees. This only works if your primary
mortgage has high rates currently.
Protect Yourself From Rising Rates
With an adjustable rate second mortgage, refinancing can protect you
from rising interest rates. Even with caps in place, you could see your
current loan period length, adding to your total loan costs.
Refinancing for a fixed rate home equity loan will provide you with the
security of a regular payment schedule. In some cases, you may also
find a lower fixed rate than your current adjustable rate.
Timing Is Important With Refinancing
With most home equity loans, you pay most of the interest at the
beginning of the payment period. So by the last half of your loan, you are
paying hardly any interest. To see the biggest savings, you need to
refinance early.
If you plan to move soon, then you will also want to hold off on
refinancing. While closing costs usually only equal 1% to 3% of principal, it
takes a couple of years to regain these costs.
Try using one of ABC Loan Guide's Recommended Second Mortgage Refinance Lenders.
To see if you have a clear benefit to refinancing, start looking at
loan quotes. Figure the potential costs of interest and fees, and compare
them to your current second mortgage. Factor in your future financial
goals, and you will have a good idea if refinancing is for you.
View our recommended lenders for Bad Credit Mortgage Refinance. Also, view our recommended sources to Check Your Credit Report For Free.
