Mortgage Consolidation: Why Refinance Both Mortgages?

There are several ways in which a mortgage can be part of a debt consolidation loan. It doesn’t ALWAYS mean that your equity has been used as collateral for a loan to pay off smaller debts because you were too deeply in debt although that is the most common scenario.

Benefits Associated with Combining 1st and 2nd Mortgages- Aside from consolidating your mortgages and making one monthly payment, a mortgage consolidation may lower your monthly payments to mortgage lenders. If you acquired your 1st or 2nd mortgage before home loan rates began to decline, you are likely paying an interest rate that is at least two points above current market rates. If so, a refinancing will greatly benefit you.

The downside is that a lot more interest will be paid over the course of 30 years on debts that would have been paid off in five years or less. One-Mortgage Consolidation: There are two ways in which a one-mortgage consolidation can be done. Refinancing the first mortgage to include other debt is one option. The other option is to take out a second mortgage.

With either option, the equity that the owner has in the property is the collateral for the loan. Two-Mortgage Consolidation: There is more than one option available for this type of mortgage debt consolidation as well. One option is to refinance the first mortgage and include the debt that is to be consolidated into that loan.

If your credit score has dropped considerably within recent years, lenders may not approve you for a low rate refinancing. By refinancing and consolidating both mortgages, be prepared to pay a higher interest rate. Before accepting an offer, carefully compare the savings. Moreover, refinancing your two mortgages may result in you paying private mortgage insurance (PMI). PMI is required for home loans with less than 20% equity. To avoid paying private mortgage insurance, homeowners may consider refinancing both mortgages separately, as opposed to consolidating both mortgage loans.

Learn more about Obama Mortgage Relief Plan Qualifications.