Combining first and second mortgages into one loan can be challenging, but sometimes it makes sense financially as well as being practical. Depending on the home equity program, 2nd mortgages may cost you a few thousand dollars in closing costs. Most closing costs are tax deductible and getting the lowest possible rate pays off in the long run. For example, With a 15 year term, you would recover the cost of the second mortgage within a few years, so if you can get 1% or more better paying some closing costs, it would be better than a home equity loan with no points.

The lending reality is that most no point no fee 2nd mortgages require credit scores over 700, and the combined loan to value will most likely need to be under 90%. If you are able to get the second mortgage with no penalty for early payoff, then get that feature with your loan, because if your home's value continues to increase, then in a year or two, you may find yourself ready to refinance because you are back at the golden 80% combined loan to value. If 1st mortgage rates happen to drop again, then you may find yourself in a great position to finally combine both loans together. If the 1st mortgage rates dropped to the 6% zone, and you still plan to live in your home for many years to come then make the move to refinance. It all comes down to what the rate are doing, when the time comes. The consolidating can makes sense financially but not in all cases. Speak to an experienced loan officer to find out if it is in your best interests to combine the two mortgages.

Combining your two mortgage loans into one sometimes will not provide you with the best financing options available. Many times when you combine a first and a second mortgage loan together it will be considered a cash out refinance instead of a rate and term refinance and there is generally a rate bump associated with this unless your Loan to Value, LTV is below 70%. Consult a mortgage professional to see if it makes sense for you to combine your 2 loans into one or if it might make better sense to simply refinance your 1st and 2nd mortgage separately. An experienced mortgage broker can structure the loan so that it benefits as much as possible.

You can also walk away from consolidating your first and second mortgages with extra money. If you combine both mortgages and request extra money that you can use for whatever purpose you want, then you can have extra money to put in your bank account as a result of the consolidation. For many people, consolidating their mortgages is a way for them to pay off other debts by borrowing extra money, leaving them with only one payment. Consolidation of the first and second mortgages is something that lenders will readily agree to. If you have a good credit record, you could get a low rate of interest and even if you have bad credit, you can still consolidate your two mortgages. However, it may be at a higher rate of interest.