Refinancing a Second Mortgage

Refinancing a second mortgage is not always the best solution for everyone. In order to help you decide if refinancing your second home loan is a smart move, consider the tips below.

Why Refinancing a Second Mortgage is a Good Idea

  • Lower Interest Rate – If you have good credit standing and if the market conditions are favorable, you can secure refinancing with an interest rate that is lower compared to your second or even primary mortgage.
  • Extended Payment Period – A refinancing loan can help you adjust a prepayment schedule that will be more favorable. This is a big consideration for people with upcoming balloon payments on their second home loans.
  • Reduced Monthly Payments – If you are able to secure a lower interest rate and a longer payment term, your monthly payments will be lower and more affordable.

Why Refinancing a Second Home Loan is Not Ideal

  • Prepayment Penalties – Since refinancing requires paying off your current mortgage in advance, you might be slapped with huge penalties by your second home loan provider if your loan contract has a prepayment penalty clause.
  • You’re Moving Out – If you are planning to move out of your home in a year or two, the borrowing costs that you have incurred when processing your second mortgage refinancing can far outweigh the potential savings you can get from the lower interest rate or reduced monthly payments.

 

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