Can You Roll a Second Mortgage Into a First Mortgage?

Second mortgages provide homeowners with a variety of options when financing their houses. Some people today use second mortgages to prevent mortgage insurance when they purchase the house. Many homeowners use home equity lines of credit, or HELOCs, to leverage the equity in their house for a variety of jobs. Some small-business owners even use them to fund their companies. Combining another mortgage with a primary mortgage is normal, but the kind of refinance used to unite these depends on what exactly the second mortgage was used for.

Document when you took out the second mortgage and determine whether any funds were used for any purpose aside from buying the house. Fannie Mae and Freddie Mac, the nation’s two largest government-backed businesses which purchase mortgages from lenders for resale, need the second mortgage for a purchase-money loan (used simply to purchase the house ) when the new loan is a rate-and-term refinance. If the homeowner shut on the second mortgage even a day after the order to refund the homeowner down his payment, the new loan will be a cash-out refinance. Cash-out refinances have a tendency to have stricter lender guidelines and higher interest rates than rate-and-term refinances. Cash-out refinances permit equity in excess of $2,000 to be withdrawn from the house, unlike rate-and-term refinances, which cap the amount of equity received at $2,000.

Determine whether you have enough equity to incorporate the second mortgage into a new first mortgage. Any loan with a balance which exceeds 80 percent of the home’s value requires mortgage insurance. The cost of mortgage may create the payment greater than the current payment on both loans. It is possible to estimate your home’s value by viewing the sales prices of other houses in your area.

Contact many mortgage lenders and get quotes for your mortgage. Tell them what the projected value of your house is and whether your second mortgage has been used to purchase the property. Contact at least three lenders when obtaining quotes. This will ensure you find a lender with fair prices and pricing.

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