mortgage refinancing
21. Refinancing
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.
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