Refinancing Or A Second Mortgage

by Sue
(Johnstown, PA USA)

Ask Kate: Refinancing or a second mortgage
We would like to pull equity out of our home to consolidate our high interest credit cards. Should we refinance our existing mortgage (fixed 15 year at 6.125 percent) for more money and lower interest rate, or apply for a home equity second mortgage in addition to our existing mortgage?



One problem, the higher amount will take us over 80% LTV (loan to value) and we don't want to escrow. The current lender won't allow that. Please help.

Kate Answers: Refinancing or a second mortgage

Hi Sue, It is imperative that you ask your lender for written good faith estimates to compare your options. Neither plan will be perfect but you should find one is more of a better fit. Once you get the paperwork, please write me back with any questions.

Keep in mind if you refinance your first mortgage and borrow more than 80% of the appraised value (this is what LTV relates to), you will need to include your property taxes and homeowners insurance in your monthly house payment, as you pointed out.

However once you go over the 80% LTV, there is another drawback called PMI. PMI stands for private mortgage insurance and can be a costly addition to your payment also. I have written an easy to read guide on PMI starting here: What Is PMI - Solutions And Answers. You can follow the links through the series to determine if PMI is your friend or foe.

Considering refinancing options can be tricky. To aid comparisons I'd like to share with you Mortgage Refinancing Questions which will also discuss how to calculate monthly house payments.

Visit Regarding second mortgage interest rates, why are there so many fees on a 2nd mortgage loan for a solution based on an inquiry from another Contributor.

I also recommend looking over the links at the bottom of this page leading to several of my Mortgage Turbo Tips. I hope you will let me know if you have more questions.

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Sue, I hope you'll come back and visit often. Help me spread the word. Please share my website with your friends. Remember, all of my information is free!

Best Wishes,

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