For homeowners who are carrying home equity loans in addition to mortgages, refinancing into one monthly payment may save quite a bit of money. Consolidating loans has the advantage of a lower monthly payment, and often a fixed interest rate. Consider these tips to help in refinancing your primary mortgage and home equity loans, without over paying for that financing.
There are many advantages for homeowners with multiple loans who want to refinance. Consolidating will make your monthly budget much easier to manage by providing the borrower with one lower monthly payment. The homeowner will also qualify for a much lower interest rate on the new mortgage than the old one. Home Equity Loans tend to come with higher interest rates because there is an additional risk, which is passed from the lender to the borrower in the form of higher interest.
Refinancing also comes with risks, however. The biggest disadvantage is that you are starting amortization from the beginning again. Most of your monthly payments will be applied to interest, therefore very little actually goes to repaying the principle of the loan. There is also an additional risk of overpaying for the new mortgage loan, so to avoid overpaying, it is important to shop a variety of mortgage lenders and brokers to find the right rates and options. Make sure to compare all aspects of the loans, not just the interest rates.
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