Before refinancing a second mortgage, a homeowner should make sure he or she is doing so only for good financial reasons. This reasons could include getting rid of private mortgage insurance or taking advantage of better mortgage rates, especially if the homeowner's credit scores have improved. When refinancing second mortgages, homeowners should make sure the costs associated with refinance will be paid quickly, borrow only the money they need, shop for the loan aggressively, and make sure all paperwork is clearly understood.
When refinancing second mortgages, a homeowner should be certain that all costs associated with the refinance will be paid for in a relatively short time. Online mortgage calculators can be used to determine payments, and lenders should be willing to provide the approximate costs of fees, closing costs, new title insurance, and and other expenses. The savings over a three to five year period with the costs should be compared; if the savings don't pay for the costs, refinancing may not be a good idea.
Getting the best rates, the rates most likely used in calculating new mortgage payments, usually requires excellent credit scores. Many lenders use credit scores from more than one company, so homeowners will want to check those scores at all relevant agencies. Any errors should be corrected, and a revised score should be requested.
Homeowners considering refinancing second mortgages should also borrow only what they need. Second mortgages, even for people with preferred credit, are very expensive. Saving enough money to pay for closing costs and fees rather than rolling them into the loan will save a useful amount in interest paid.
When refinancing second mortgages, homeowners should shop the loan aggressively. Four or five lenders should be contacted to find out what they have to offer. Homeowners should remember to find out what fees they charge as well as what interest rate is offered. The lender with the best package of low fees and lowest interest rates is likely to be the best choice.
Generally, the lender will gather relevant personal information from the client and make a specific proposal. If that proposal is what was expected, the homeowner should plan a meeting with the lender; if it was not, he or she should ask why. This may be the time to ask for a proposal from the second choice lender. Before signing paperwork with any lender, the homeowner should again make sure the savings out-weigh the costs in the short run.
When the homeowner finds a proposal acceptable, it's important that he or she read the paperwork. This rule is applicable for obtaining first mortgages, second mortgages, or for refinancing second mortgages. The homeowner should ask any and all questions that come to mind, including what happens if a payment is missed or is late. Questions should not be left unasked, however small they may seem. Even little details are important in refinancing second mortgages.
After all questions are answered, the homeowner can reopen negotiations. He or she may want to insist on having some of the fees or closing costs waived, even if only the appraisal fee. Should the lender refuse, the homeowner may want to take a time out to consider the situation, and leave the office. If a lender claims he cannot reduce fees, the homeowner may want to reconsider the trust issue; most fees are negotiable.