There are several options available for homeowners with home equity loans when it comes to refinancing. You can consolidate your primary and secondary mortgage into one monthly payment. Another option that could save you money is to refinance your home equity line of credit to a second mortgage. Choosing a second mortgage over a home equity line of credit will allow you to qualify for a lower fixed interest rate.
Should You Consolidate or Refinance Just One Loan?
If you are considering refinancing your equity line of credit, take a look at your primary mortgage. Depending on the terms and interest rate of your first mortgage you might find consolidating both mortgages would be in your best interest. By consolidating your home equity line of credit with your primary mortgage you could save money on closing costs and qualify for a lower interest rate.
If you are happy with your primary mortgage and already have an exceptional interest rate, consolidating may not be the best option. Compare loan estimates for consolidating and rolling your home equity line of credit into a second mortgage to determine which option is best for your financial situation. Once you have decided to go through with refinancing your loan, you need to compare loan offers from a variety of lenders and brokers to determine which lender is best for you.
If you need a specific payment amount to make ends meet with your budget you can adjust the term length of your new mortgage to lower the monthly payment amount. Even if you do not qualify for a lower interest rate you can still lower your payment amount significantly by choosing a mortgage with a longer term length. If your goal is to build equity in your home as quickly as possible, choosing a mortgage with a short term length will raise your payment amount, build equity faster, and possibly net you a lower interest rate. Fees and interest rates vary widely from one lender to the next so it is best to shop around to make sure you get the best deal on your new mortgage. You can learn more about your mortgage options including ways to avoid common homeowner mistakes by registering for a free mortgage guidebook.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
