Refinance Second Mortgage - A Smart Decision?

The decision to refinance second mortgage is not an easy one to make.

Sure lower interest rates have made refinance a popular option for many. Especially for those that purchased their home years ago with interest rates at 10% or even higher. It's easy to save thousands of dollars by doing so by simply lowering your monthly payments. Or, if you refinance your second mortgage you can get your house paid off quicker without increasing your monthly payment.

First let's look at what a second mortgage actually is. For some it's a way to buy another home, and for others it's a way to get cash if you need it quickly. All you are doing is taking out another loan on property you already have mortgaged. Normally a second mortgage has shorter terms, usually from 5 to 15 years. If you currently have a second mortgage, refinancing it can save you a lot of money if you are currently paying a high interest rate.

But before you refinance second mortgage, consider a few things carefully. It may be advantageous to instead to get a new second mortgage. How will this help? Well you can lock in things like a fixed rate, terms and payment if that is not the case with the second mortgage you already have.

It can be confusing at times, and that's why it's so important to find the right lender. You want one that can explain things clearly in a way you understand fully what your options are and what is best for your situation. You want one that will work with you, not someone who just puts the offer on the table and says "take it or leave it" without making clear all the options available.

Obviously you want to save money or you would not be considering this to begin with. Find an interest rate that will lengthen the period of your loan yet allow you to make the same monthly payment. And make sure you understand the fees and closing costs. Refinancing your second mortgage is not free. Understand fully how much this will cost and how long it will take you to recoup the fees you will be paying.

Don't be afraid to ask family and friends for the name of a good lender. Do not think you simply have to go with the lender who currently holds the mortgage of second mortgage. You are not locked in. By asking around you'll likely learn who will work with you, and just as importantly, you learn who you should avoid as well. Then the decision to refinance second mortgage will become much clearer.