Strategies if you currently have a first and second mortgage (or home equity line/loan):
Refinancing both your first and second mortgages into one low fixed interest rate, will result in one low monthly payment that could save you thousands in interest charges. By combining both mortgages, you qualify for lower rates than if you refinance each separately. You can see a significant savings on your fixed rate second mortgage, which is often several points higher than your first mortgage rate. If your second mortgage is an adjustable rate line of credit (which is usually tied to the prime rate), you will want to get out of that mortgage while the prime rate is still low. This is an excellent time to make that move.
Strategies to lower your monthly mortgage payment:
You have a couple of options to lower your mortgage payment when refinancing. The first choice is to simply find a new low rate mortgage. Even if you choose the same length for your loan, you will still see a savings in your monthly mortgage bill with a lower interest rate. Adjustable rate mortgages will give you the lowest payments, at least at the beginning of your home loan, but a fixed rate loan will give you the security that they won’t rise in the future.
The other option is to extend your loan term, especially in the case of your second mortgage, which usually is for five to ten years. By consolidating your loans to one thirty year loan, you lengthen your payment schedule for principal, so you have a smaller payment.
Getting the best mortgage:
Once you determine the type of loan and terms you want, do your shopping for a good lender to save even more money on your mortgage refinance. Lenders will vary in how much they charge for closing costs and interest rates. The APR will tell you how loans compare overall, both in terms of rates and closing costs.
If you are planning to move or refinance again in the near future, then be wary of paying high closing costs. Even if they secure you a lower rate, you will only see a savings if you keep the mortgage for several years.
Don’t base your lender decision on posted loan rates. Ask for a personalized loan quote based on your general information. With more accurate numbers, you can make an informed choice as to who has the best financing for you.
Lester Bleich, New York State Licensed Mortgage Loan Originator 