The strategy of refinancing your first mortgage is normally to get a lower
interest rate. Refinancing may also be a strategy in debt consolidation. High interest
short-term loans, such as credit card debt, can become much less burdensome if the
interest rate is reduced substantially and the payback period is stretched over 15 or 30
years. If you are over-extended with short-term debt, refinancing your mortgage and using
the proceeds to pay of the short-term debt may be a good strategy, if implemented before
your credit rating is ruined. You may even refinance your first mortgage and add a
subordinate second mortgage as part of the overall debt consolidation strategy.
Seasoning of second mortgage - Second mortgage amounts may have to be at least
one year old (seasoned) to roll them into a first mortgage when re-financing.
Cash out the rules for walking away from the refinancing settlement
table with cash left over are complex and not easy to pass. If you want to refinance your
first mortgage to get cash for a vacation or credit card consolidation or whatever,
discuss this with your lender. You may be better off refinancing your first mortgage
without taking cash out, then taking a second mortgage for the cash you want.
Sources of loan application and settlement funds - There is a good chance you
can roll the refinancing loan costs into the new mortgage if other factors such as
loan-to-value ratios remain favorable.