Tuesday, June 21, 2011

When is the best time to finance a second mortgage?

When You Can Take a Larger First Mortgage

The best time to refinance a second mortgage is when you can get rid of it completely. If you can refinance both your first and second mortgages into one larger first mortgage, you will pay the entire balance at the lower rate typically reserved for a first mortgage. For instance, if you have a $200,000 first mortgage at 6 percent and a $50,000 second mortgage at 8 percent, and you wrap them into a single $250,000 loan at 4.55 percent, you save approximately $3,588 in interest your first year. Ensure, though, that you will not pay private mortgage insurance on the new loan. PMI typically comes into play when you owe more than 80 percent of the home's value and can eliminate your interest savings.

When Your Fixed Rate Is Too High

If your second mortgage carries a high interest rate, refinancing to a lower rate, especially if it is fixed, can save you a great deal of money. Although a second mortgage will almost always have a higher rate than the advertised rates for first mortgages, you may still be able to save money.

When Your Credit Improves

Mortgage rates typically track your credit score quite closely. The worse your credit, the higher your rate. Conversely, if your credit improves, you should be eligible for a loan with a lower rate. If your credit score has significantly improved, look into refinancing with your new qualifications.

When You Have an Adjustable Rate

If you have a mortgage with an adjustable rate, your payments may fluctuate as the index changes to market conditions. If rates go down, your payment will go down, but if the rate increases, your payment will go up. As of March 2011, interest rates remain near all-time lows, meaning that when rates move they will be much more likely to move up than down. Refinancing your mortgage to a fixed rate will protect you from these likely future rate increases.

You Never Know Until You Ask

Many borrowers today are terrified about the economy and the position that they are in. Many think that with all the changes and headaches in today’s current mortgage industry, that it doesn’t even make sense to ask the question. Now more than ever it is time for all to act as we have never been in a rate environment like todays. Many economists predict that the end of low rates is soon to come. With our no cost / no obligation rate quote, you can’t lose for asking the question ‘what can I qualify for’. Our mortgage professionals can guide you to a lower rate and/or give you a road map to get yourself set up to achieve your financial goal of a purchase or a refinance. To apply today go to the Secure MAC5 Loan Application and take 10 minutes to fill out the online application and start saving money today!

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