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The hassle of making two monthly mortgage payments has prompted many homeowners to consider refinancing their 1st and 2nd mortgages into one loan. While combining both loans into one mortgage is convenient
and may save you money
homeowners should carefully weigh the risks and advantages before choosing to refinance their mortgages.

Benefits Associated with Combining 1st and 2nd Mortgages

Aside from consolidating your mortgages and making one monthly payment
a mortgage consolidation may lower your monthly payments to mortgage lenders. If you acquired your 1st or 2nd mortgage before home loan rates began to decline
you are likely paying an interest rate that is at least two points above current market rates. If so
a refinancing will greatly benefit you. By refinancing both mortgages with a low interest rate
you may save hundreds on your monthly mortgage payment.

Furthermore
if you accepted a 1st and 2nd mortgage with an adjustable mortgage rate
refinancing both loans at a fixed rate may benefit you in the long run. Even if your current rates are low
these rates are not guaranteed to remain low. As market trends fluctuated
your adjustable rate mortgages are free to rise. Higher mortgage rates will cause your mortgage payment to climb considerably. Refinancing both mortgages with a fixed rate will ensure that your mortgage remains predictable.

Disadvantages to Refinancing 1st and 2nd Mortgage

Before choosing to refinance your mortgages
it is imperative to consider the drawbacks of combining both mortgages. To begin
refinancing a mortgage involves the same procedures as applying for the initial mortgage. Thus
you are required to pay closing costs and fees. In this case
refinancing is best for those who plan to live in their homes for a long time.

If your credit score has dropped considerably within recent years
lenders may not approve you for a low rate refinancing. By refinancing and consolidating both mortgages
be prepared to pay a higher interest rate. Before accepting an offer
carefully compare the savings.

Moreover
refinancing your two mortgages may result in you paying private mortgage insurance (PMI). PMI is required for home loans with less than 20% equity. To avoid paying private mortgage insurance
homeowners may consider refinancing both mortgages separately
as opposed to consolidating both mortgage loans.