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How to Refinance a Second Mortgage


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TERMINOLOGY

Knowing how to refinance a second mortgage can be one of the most important things you will ever learn to do as a homeowner. Refinancing can reap big dividends if you approach it in a deliberate and knowledgeable manner. There are many reasons why you should look into refinancing their second mortgage, including decreasing your monthly payments, lowering your interest rate and reducing or eliminating private mortgage insurance (PMI). It can also help you change the term of your loan if your financial situation has changed, as well as help you get cash back at closing. In some cases, refinancing can also allow you to consolidate your first and second mortgage into a single loan. 

How to Refinance

The first step in refinancing your second mortgage is to determine whether or not it will prove of financial benefit to you. The best way to go about this is to talk to your broker or to use a mortgage calculator to see if any savings would be headed your way.

Perform an investigation into your financial condition by first getting a copy of your credit report. If your credit is "good," you should proceed. If not, you may want to wait on refinancing and focus instead on rebuilding your credit.  If any mistakes appear in your credit report, challenge them immediately.

Once your credit has been reviewed, build up your savings account by making sure you will have more than enough to cover any closing costs involved with the refinance.

Contacting Lenders

The next critical step is to contact at least three lenders. Learn as much as you can about the refinancing programs they offer.  Inquire into specifics about lending and any fees and additional costs you may incur. 

Once you have learned all that you can about the lenders you have contacted, pick the one that you think will be able to best meet your needs. Also, do not settle for a lender because they are the first one you have contacted. Always shop around for the best deal and see who is willing to fight for your business. Getting the best interest rate is not as difficult as you may think, especially in a market where interest rates are still as historic lows. 

Paperwork & Questions

Review all of the required paperwork and documentation to ensure accuracy. Also, make sure to discuss all closing costs that you will incur in the loan. If you have any lingering questions about the terms of your loan, ask your lender before you pay any money for the loan. No matter how small your concern may be, you need to make sure you are entering into a contract about which you are fully knowledgeable and in agreement with. 

Before you sign anything, take stock of your financial situation and make sure that you are able to meet the new financial obligations that will result from the completion of refinancing.