My loan-to-value is 100%. Can I refinance and combine my first and second mortgage into one payment and get cash out?
I currently have two mortgages on my home and I would like to refinance them to one payment and possibly get some cash. The balance on the two mortgages equal the value of my home. Is is possible to refinance?
if you want the convenience of making single payment or combining both your loans into one would save you significant money, you can refinance both loans together.
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 accrue additional equity during this time, which will help ensure that your new loan and settlement costs do not exceed the value of your home.
compare your potential savings to your costs. if your first and second both have low fixed interest rates and there is not a large gap between those rates, refinancing may cost you more than you would save.
consider how much time you have left on your first loan. if you are less than 10 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.
also consider the dangerous position you may put yourself in, if the value of your home decreases and you want to refinance. let us assume you do not refinance, your home value decreases, and your income falls. (the latter two occurrences have been common the last two years.) assuming the bottom drops out of your home value and income, you may stop paying your second mortgage. the second mortgage holder has the legal right to foreclose, but probably will not for economic reasons. if you default on a second mortgage and the value of the two mortgages is greater than the property value, many bills.com readers have reported that second mortgage holders have negotiated lump-sum settlements of 10-15 cents on the dollar to resolve the second mortgage.
refinancing the two mortgages together will remove that option to resolve a large portion of your overall mortgage expense.
refinance a first and second mortgage together
lenders typically require you to have a 90% loan-to-value ratio if you want to refinance. they also want to see that your home has increased in value. most lenders will not refinance your home if it is losing value.
you mentioned "the balance on the two mortgages equal the value of my home" which means you are at 100% loan-to-value (ltv). therefore, your idea of refinancing and combining the first and second into one is not a certainty. i also think your idea of extracting some equity from the property is a long-shot given you are at 100% ltv.
if you are facing a significant increase in your interest rates, you should contact lenders to find out what refinance options are available to you based on your current financial situation. the only way to determine whether or not you will qualify for a refinance loan is to apply for a loan with several different lenders and/or brokers.
bills.com makes it easy to compare mortgage offers and different loan types. you can get a free, no obligation mortgage quote from one of bills.com's pre-screened lending partners.
harp mortgage refinance
home affordable refinance program (harp) allows home owners to refinance their existing mortgages to current low interest rates. it is designed for homeowners who are current on their mortgage payments but are unable to refinance to a lower interest rate because their home values have decreased.
homeowners may be eligible if their first mortgage does not exceed 125% of the current market value of the home. for example, if your property is worth $200,000 but you owe $250,000 or less on your first mortgage, you may be eligible. see the bills.com resource harp mortgage refinance to learn more about the harp program.
i hope this information helps you find. learn & save.
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