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Options to Refinance a Second Mortgage

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Updated: Oct 23, 2014

Highlights

  • You can consolidate a second mortgage with your first into one mortgage, when you refinance.
  • Depending on rates and fees, it may make sense to refinance just the second loan.
  • Shop around to find the best rates and fees to refinance your second mortgage.
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Tips to Refinance a Second Mortgage, compare 2nd mortgage rates, terms and solutions to a second mortgage refinance loan.

If you have both a first and second mortgage, or a first mortgage and a HELOC, you have the option to refinance the second mortgage, the first mortgage, or combine both mortgages into a single loan.

You can receive mortgage rate  quotes from Bills.com pre-screened partners.

Refinance a Second Mortgage Only

The simplest option for refinancing a second mortgage or HELOC with a high adjustable or fixed rate is to contact your current lender about refinancing to a lower fixed rate loan. If you're payments have been on-time and you have good credit, your lender may offer you a streamlined loan that requires less paperwork and time and includes fewer costs. If your lender doesn't agree to a streamlined loan, you should be able to find other lenders who are willing to offer you good terms and a good rate.

 

Refinance a First and Second Mortgage Together

If you'd prefer the convenience of a single payment and combining both loans into one would save you significant money, you can refinance both loans together. In order to qualify for the best rates, some lenders require you to wait a year after receiving the second mortgage before refinancing it. Your home may also gain equity during this time, which will help ensure that your new loan and settlement costs don't exceed the value of your home.

You can refinance a first mortgage together with either a home equity loan or HELOC into a single new first mortgage. Before you do, compare your potential savings to your costs. If your first and second both have low fixed interest rates and there isn't a large gap between those rates, the costs of refinancing may be greater than your savings.

Consider how much time you have left on your first loan. If you're less than ten years away from paying off the first loan, refinancing could actually cost you more because most of your payments are going toward the principal balance rather than interest. Unless you can afford to complete paying both loans in the same time frame as your original loan, this may not be a good option.

Refinance a First Mortgage Only

If you have both first and second mortgages, it is possible to refinance just the first, but it isn't easy. Your first mortgage is the mortgage listed first with the registrar. When you refinance a first mortgage, any other home loans move up in line, so your second automatically becomes your first. In order to refinance your first as a new first, your second lender must agree to continue subordinating their claim. Some lenders refuse. If your lender refuses, your only options are refinancing both mortgages into one new loan or refinancing both mortgages separately into two new loans.

Before refinancing any mortgage, carefully consider your options. Use refinancing calculators to compare costs and savings from all three options and then make the best decision that you can.

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9 Comments

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  • JB
    Oct, 2013
    Jason
    I wish I had read this before I got my loans!
    0 Votes

  • CH
    Feb, 2012
    Carolyn
    We would like to consolidate our 1st with BofA and our 2nd with Chase. Our house was bought in 2002, refinanced in 2004 with BofA at 5.25%. The 2nd was a mistake (of course) and originally an equity line with WAMU. When Chase bought them the line was closed and the 2nd was left with a decent although variable rate. Lately it has been 3.25%. Until now we have just been stuck because of the 2nd with no way to refinance even though we have excellent credit. We live in Sacramento CA. Any suggestions?
    0 Votes

    • BA
      Feb, 2012
      Bill
      If you don't have equity in your home, and I know that the Sacramento market has taken a beating, then there are currently no good options for refinancing your second mortgage.
      0 Votes

  • HS
    Feb, 2012
    Hnmann
    I have a 80/20 loan. The first one has 4.875% and 2nd has %8.675. The total I have on both loans is 165k, the home value is $195k.. What do you suggest? How do I get rid of the high interest rate on 2nd. I have excellent credit.
    0 Votes

    • BA
      Feb, 2012
      Bill
      You will most likely not find a lender who will refinance the second mortgage only. You can try to refinance the whole package with PMI, or you can try to bring the balance down to 80% LTV and do a conventional loan refinance. However, you will have to pay fees for the whole loan, which may not bring much savings. I suggest that you try to make accelerated payments on the second mortgage and bring the balance down as quickly as possible.
      0 Votes

  • AM
    Oct, 2011
    Abbas
    I have 2 mortgages with BOA. The LTV for the 1st mortgage is 93% and combined 110% based on the value of the house on Zillow.The interest rates are 5.25% and 8.25% respectively. I refinanced the first mortgage 1.5 years ago with subordination of the second. The bank is not willing to refinance. Never late, excellent credit. What are my options? I would like to reduce the interest rate on the 2nd.
    0 Votes

    • BA
      Oct, 2011
      Bill
      There are not a lot of good options out there, I am sorry to say. Please review the Bills.com resource about options for underwater homeowners.
      1 Votes

  • AD
    Oct, 2011
    Alice
    In 2005 we bought our house with a 80/10/10 combo. Have never been late on any payments. In Oct 2010 we refinanced the primary mortgage with the same lender (Wells Fargo). I requested that the HELOC be rolled into the new mortgage, but they refused, because that would have made the new mortgage more than the value of the house. No mention of the HELOC was even made at the closing.no adjustments, nothing, just new payment statemenst every month for the 1st mortgage. Wells Fargo sold the 1st mortgage in Jan. 2011 to Fanny or Freddie...Did they do the refi just to convert my HELOC to a recourse loan? And how do I find out what position the HELOC is now in?
    0 Votes

    • BA
      Oct, 2011
      Bill
      If the HELOC was not refinanced, then it retains whatever no-recourse characteristics it had (or did not have) since day-1 of the loan. When the mortgage servicer refinanced the first, it should have asked or required the second to sign a subrogation agreement. Consult with a lawyer in your county. He or she will task a paralegal to do a title search to learn the order of the mortgages or deeds of trust on your property.
      0 Votes