I have a first and second mortgage on my house. Could I refinance my first mortgage just to reduce the rate without getting into appraisals, etc?

Asked by Wayne Schofield, Londonderry, NH Fri Dec 21, 2012

Reason is, my 2nd mortgage is only for 7 more years and I don't want to fold that into a refi on the home, which I'm looking to do a 15 year mortgage on (to bring my current term down by 5 years)

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Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Sat Apr 22, 2017
The short answer is "maybe." The better answer is that you will likely need an appraisal. Some of this will depend on the loan sizes in question and it sounds like the two loans you have were not "purchase money," that is, they were both not used exclusively to buy the home. When that happens, conforming guidelines will dictate that the refinance you complete to consolidate the two will be considered a "cash out" refinance (even if no cash goes back to you) and cash out refinances require an appraisal nine times out of ten.

There are quite a number of nuances when it comes to consolidation refinances but even where you need an appraisal it can still make good sense to look at combining the loans. It's probably never a good idea to base the decision just on the published interest rate because the underlying math tells the bigger and more important picture, and as you correctly allude to, there is always cost involved in a refinance, even if it is billed as "no cost."

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Tim.Grenier, , Londonderry, NH
Thu Mar 7, 2013
Hi Wayne! If your first mortgage was written prior to June of 2009, you are able to refinance your home and the 2nd Mortgage is able to be Subordinated by law. Hope this helps! Tim Grenier, Loan Officer, Manchester NH
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Wayne Schofi…, Home Owner, Londonderry, NH
Sun Dec 23, 2012
All great answers and thank you for them. Dane, I probably will do exactly that, but I was curious if there was a way to just refi the first. Actually, the holder of the 2nd mortgage is who I'm looking to do the refi with so it will be easy, but if they balk, I wanted to explore the options.

Thanks again for all the great insight to all.
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Dane Hahn, Agent, Boca Grande, FL
Sat Dec 22, 2012
Others have given you good answers, but I wondered why you would not roll the 2nd into the new 1st mortgage, given the low rates available today? It sounds like you have 20 years left on your 1st, mortgage, and 7 on your second.

I know it sounds good to be without a mortgage, but it doesn't make sense when money (for mortgages) is so cheap. If you understand inflation, and what the coming inflationary cycle will be doing to our economy, you will rethink this whole thing. I would 1. wait until mid January to see what the administration wants to do with deductions for home loans. 2. Seriously consider rolling all your debt into one mortgage and set the term (the number of years of the new mortgage) based on what you can easily pay. About one person in 1000 pays off a mortgage while living in the home. Most people sell the house, and move on--the closing company pays off the mortgage with the proceeds from the sale.
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Scott Godzyk, Agent, Manchester, NH
Sat Dec 22, 2012
It is unlikely. The 2nd mortgage would have to sign allowing the refinance of the 1st. Any bank will want an appraisal so they know the value of the home is within the guidelines of the mortgage they are giving yo. you should start by meeting with a local and trusted loan officer who can look at your credit and current loand and advise your options and what the cost will be.
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, ,
Fri Dec 21, 2012
Shane is correct. As long as the lender that holds your current second mortgage allows you to subordinate it behind the new first mortgage you do not have to pay it off or close the account. Your lender on the second mortgage will often charge you a fee to do this. However, as Shane points out, it is best to sit down with a qualified mortgage professional either by phone or in person to analyze your situation and see what route makes the most sense.

To answer the first part of your question, depending on the type of first mortgage you have now you may be able to refinance your first mortgage without a new appraisal. However, the lender on your second mortgage might still require on in order to subordinate.
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, ,
Fri Dec 21, 2012
You aren't always required to combine your 1st & 2nd mortgage into a new 1st mortgage if you want to refinance. Refinancing of only the 1st mortgage is done all of the time, but when you have a 2nd mortgage and are only refinancing the 1st mortgage, the 2nd mortgage needs to subordinate to the new 1st mortgage you are getting. The reason being is that it was assumed that when you obtained the 2nd mortgage, that if the 1st mortgage was ever paid off (even in a refinance situation), the 2nd mortgage would slide into the 1st lien position on the title of your home - giving them greater protection/lesser risk in case of a default.

The subordination process requires the 2nd mortgage lender to evaluate the refinance of the 1st mortgage you are attempting to do, often including a full credit review, income/debt review, title report review, and even an appraisal review to make sure you have sufficient equity in the property. The appraisal isn't always required by them, for example if you are refinancing under the Making Home Affordable (HARP) program, or if you are doing a "streamline" refinance of your 1st mortgage, then the 2nd mortgage lender usually doesn't require an appraisal.

However depending on the details of your current 1st mortgage, you may still be required to get an appraisal for the refinancing of your 1st mortgage. There is no loan product that will just automatically lower your interest rate without any review - your information will always be reviewed by an underwriter if you want to refinance into a new mortgage. Even if you apply for a loan modification (which can potentially damage your credit) rather than refinancing, your information will still be evaluated.

As far as your reason, that is fine to not want to extend the length of the loan out any further than it already is, however you must realize that the payments on your mortgage statements are just the minimum you are required to pay. You can always make more than the minimum required payment, and in turn, that will reduce the amount of time it will take you to pay off that loan. So even if you refinanced into a 15-year loan, you can still make equal payments which would pay off your mortgage in 7 years. So if the rate on the new 1st mortgage refinance would be lower than your 2nd mortgage rate, it could be smarter to include that into the new 1st mortgage since you would be lowering the interest rate on all of the mortgage debt. That is where you and the loan officer would analyze the different options, and determine if combining your 1st & 2nd mortgage into a new 1st mortgage would be more beneficial than leaving the 2nd mortgage in place. Remember, it is the interest rate you are paying on your money vs. the term of the loan, because the term of the loan can always be shortened by making a larger payment than the minimum required.

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes
You are welcome, have a good holiday weekend!
Flag Fri Dec 21, 2012
Great Info. Thank you very much Shane!
Flag Fri Dec 21, 2012
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