We help you in Consolidating your Debts

There may come a time when you have extra cash in your hand and decide to reduce your debt load to some extent. You can utilize the amount to make some extra payments towards repaying your mortgage loans. While doing so, you may come across the question, second or first mortgage – which one to pay off first?

Which to pay off first – First or second mortgage

You should consider the following 3 factors in order to decide which loan to pay off first – the first mortgage or the second one.

1. Highest interest rate mortgage:

If both of your home loans are fixed rate mortgages, then you should consider paying off or making some extra payments towards your higher interest rate mortgage first. In this way, you can save a significant amount every month that you can utilize to pay off other debts. You can use a mortgage prepayment calculator to compute how much you can save if you make some extra payments towards the principal amount of your mortgage loan. You can browse through mortgage related websites to find such a calculator.

2. Loan with prepayment penalty:

You should also assess the terms and conditions of your first and second mortgages so as to check which one has a prepayment penalty attached to it. You should make extra payment towards the mortgage that doesn’t have any prepayment penalty attached to it.

3. Adjustable rate home loan:

You should pay off your adjustable rate mortgage first as the interest rate may increase in future. However, if both of your home loans are adjustable rate mortgages and they’ll be resetting in near future, then it is advisable that you use the extra cash to pay the closing costs of mortgage refinancing and combine both the loans into a single fixed rate mortgage.

Refinance – Consolidate first and second mortgages

Mortgage refinancing helps you to consolidate your second and first mortgage and replace them by a home loan with new terms and conditions. There are some other benefits of mortgage refinancing that are given below.

• Monthly payment on the refinance loan is usually lower in comparison to the combined monthly payments on first and second mortgages.

• You can convert your adjustable rate mortgage/mortgages into a fixed rate home loan with a comparatively low interest rate.

• It is much easier to manage a single refinance loan instead of making monthly payments on your first and second mortgages.

You can take help of a consolidation and refinance mortgage calculator to compute how much you can save over the entire loan term if you consolidate your second and first mortgages into a new refinance loan.

Useful Sites :

Shop for today’s lowest current mortgage rates on Lender411.com and compare best refinance rates.

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