I have to agree with Mr. Tepper and Mr. Charest. Sit on it and sell later. Are you really going to spend $12000 to lower your second mortgage payment? Really? Do you have other debt that you can look at paying off to help offset the second mortgage payment difference? In other words, the difference between what your paying now (about $900) versus your new payment at 5.5% ($500) is about $400. Is there another debt (car loan, credit cards) that you could pay off instead to offset $400 a month and leave that thing alone? So many people jump to refinance, when in fact the reason they are hurting is because of other debts (maybe that's not you). But, before you start trying to kill yourself to accomplish the near impossible, look at making an extra $400 a month or cutting $400 a month from your budget. I'm guessing you have an FHA loan on the first. FHA doesn't go to 125% as Mr. Tetloff mentioned (by the way his idea is good...however)...The new 125% comes at a price. About 3 discount points. Let's see, that's $225 times 3% plus 3% in closing costs ($12000). That's a lot of money. Yes, they'll shave a half point discount if you take the loan to 25 years vs 30 years.