Refinance Second Mortgage - In the lending world, the term "second mortgage" can apply to several types of loans: a fixed rate home equity loan, an adjustable rate home equity loan, an adjustable rate HELOC (home equity line of credit), or any other type of loan that uses your home as collateral.
If you're considering refinancing a second mortgage, you must first identify the type of loan you have, the interest rate you're currently paying, and the length of your remaining term. Next, consider your refinance options:
Refinancing a flexible rate HELOC into a fixed rate home equity loan. If the interest rate you're currently paying on your HELOC is at a low point, it may be hard to find a home equity loan with a lower rate. However, since the interest rate on HELOC loans is extremely volatile, refinancing at a fixed rate will offer protection from future interest rate increases.
Refinancing current home equity loan to a new loan with a lower interest rate. If you're considering this option, you can save even more by shortening the term of your loan. Refinancing a 15-year home equity loan into a lower rate 10-year loan could translate into significant long-term savings.
Paying off HELOC or home equity loan with a cash-out mortgage refinance. When you refinance your original mortgage at a lower rate, you can exercise the cash-out option to pay off your second mortgage.
Refinance original mortgage, and roll in the HELOC or home equity loan balance. If the balance of your original mortgage is at $110,000 and you have a second mortgage with a balance of $20,000, you may be able to refinance your mortgage at $130,000 and pay off your second mortgage.
There are many factors to consider with regards to a refinance second mortgage. Not only will your personal financial scenario, comfort level, and financial goals play a role in your decision, but you'll also have to evaluate the loan types, interest rates, fees, and terms of various lenders. Before choosing a loan type or a lender, thoroughly examine all options and make sure that you're not entering into a financial agreement that may prove to be a costly mistake.