John's mortgage broker would simultaneously apply for two loans with the knowledge that he truly can afford them both. But the same process would apply. Approval is contingent on the age of the second and how much equity is in the home. When the first is refinanced, the second moves up the chain in a process called resubordination. Although this will increase your total loan interest payable, it can free up you current financial constraints. Refinancing your loans individually can sometimes get you better interest rates. The bigger component is looking at closing costs rolled into the loan so you don't pay anything out of pocket. Obviously you have to make sure the closing costs and terms are reasonable before committing to consolidate 1st and 2nd mortgages into a new loan. If your goal is to make payments more manageable now, then this makes sense. Interest rates are still great so your timing could be perfect. Remember to note the total amount of interest you will pay or save. Equity is also important, because the new loan cannot exceed the current value of your home. While every lender is different, the consistent waiting period is at least 12 months from when you were approved for the second mortgage. Even though he can afford substantially more, he cannot get enough in the remortgage deal to cover the transaction. As for lenders, they obviously benefit from being able to loan more money than stricter lending requirements would otherwise allow. In fact, the month requirement mentioned by BOA above is pretty standard. Ask Your Broker If you have any plans to remortgage your home in the near future, be sure to ask your broker about simultaneous first and second charge products.
Where a remortgage might not be possible due to LTV issues, getting simultaneous first and second charge products would make it very possible to settle the interest-only deal fairly easily. Or is it best to keep the loans separate? Because property values have dropped in most cities across the country, and in many places they have dropped like a rock. They now have a first and second mortgage on their home. If your main concern is to pay less on interest costs, opt for a shorter repayment schedule with the best interest rates. Of course, the payment will be higher. If you would like to learn more about this topic, I recommend that you talk to a mortgage lender. Equity is also important, because the new loan cannot exceed the current value of your home. Is refinancing possible under the circumstances? It is possible to refinance first and second mortgages, combining them into one. So additional financing is needed to push things through. This is where the second mortgage comes into the picture. Because of intense competition in this industry, there are always new promotions with varying terms. Do not leave out the cost incurred for refinancing. Most lenders will require you to wait at least 12 months after securing the second mortgage, before you can refinance it. Other than that, it will also help you save on charges because you will only have to pay them on 1 combined loan instead of 2 separate ones. You do have more bargaining power since you are not going to be desperate to get a loan. At the time, interest rates were higher, but lending standards were easier. Because loan companies would rather finance 1 mortgage than 2 separate loans, the 2nd mortgage rates are often at least a little higher than 1st. Typically, it will depend on the following things: Interest rates are still great so your timing could be perfect. John is a homeowner who is looking to remortgage his property in order to avoid a much higher interest rate at the end of this fixed term. You may also find that you have to carry private mortgage insurance PMI with the refinanced mortgage. A lower rate could mean thousands of savings on your loan. I hope this lesson helps you understand the relationship between home equity, refinancing, and piggyback mortgage scenarios. Does it make sense?
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