Using Second Mortgages to Refinance Your Debt 

by Greg Cryns

      At any point in time, you might find that the deal you once got on a loan would better serve you if it were refinanced with new loan obligations.  Second mortgages are a way to refinance your debt to help you achieve the financial security you strive for. 

      Many homeowners often secure a second mortgage on their property.  A second mortgage is a loan using the home as collateral.  If the house is sold, or the homeowner defaults on the loans and the lender sells it, the 

payments are made to the second mortgage after the first mortgage is paid off. Refinancing your second mortgage is necessary when the time comes to restructure your debt.  You might find that you’re in need of home repairs or other costly expenses and a second mortgage met those financial needs. 

      But you want to ensure your loan terms are beneficial to you as a homeowner, so refinancing when you’re able to get a better deal is a wise investment of your money.  Never refinance your second mortgage so that it puts a strain on you financially.  Your home is the collateral, so you don’t want to risk losing it because you bit off more than you could chew. 

      Second mortgages generally have a higher interest rate than first mortgages, but you still want to negotiate the best deal you can find.  Watch the market to see when interest rates are in a decline – that’s a good time to refinance your second mortgage. 

      You won’t have the strict underwriting criteria to meet like you did with an original loan on your home, since second mortgage loans are more lax.  You’ll find that refinancing your second mortgage is a faster process and generates lower fees you have to pay, even though the interest rate may be slightly higher.   

      When you refinance your second mortgage, you’ll be able to choose from a traditional second mortgage, a home equity loan or a line of credit.  You can determine if you’d prefer a monthly payment option or just be required to pay back the loan during a certain timeframe on your own schedule. 

      You may find that refinancing your second mortgage helps lower your monthly payments, and gives you additional cash when needed.  Make sure your mortgage isn’t above current interest rates, and if you have to, go to a sub-prime lender who can help you even if your credit is a mess in its current state. 

      Approval moves along at a quick pace, often giving you an answer in 24 hours as to whether or not you have the option to refinance your second mortgage.  Make sure you shop around and let lenders compete for your business, and don’t just go with the first offer you see.

Greg Cryns is the owner of Flat Fee Real Estate Guide - http://www.flatfeerealestateguide.com