How to Combine the First & Second Mortgages
A first mortgage is a secured loan acquired to buy a home. This is the first lien against the home. Therefore, the lender is first in line to receive an amount up to that of the loan balance existing when you sell the home. The lender for a second mortgage is second in line to receive payment for the second loan balance. Examples of second mortgages are a line of credit and a loan for the down payment to buy a home. At some point, you might need to consolidate the first and second mortgages to improve your monthly cash flow by taking advantage of a lower loan rate.
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Instructions
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Determine your refinancing cost. For example, your lender might require a prepayment penalty. Your lender might charge this fee when you pay off your loan before the loan term ends.
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Determine if you have enough equity in your home to pay off your second mortgage. Obtain an appraisal of your home or research the housing market in your area to determine an approximate appraisal.
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Shop around for a lender that offers the best terms. Compare loan rates and loan fees.
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Apply for a home refinancing loan. Request a "cash-out option" that includes the amount to pay off your second mortgage. Typically, the refinancing lender will pay the second mortgage lender directly.
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