Last month, a homeowner called me panicking because her adjustable-rate HELOC payment had jumped almost $200 in one month. The rate had climbed from 7.5% to 9.2%, and she wasn't prepared for that kind of increase. We walked through her refinancing options together, and by the time we finished, she'd figured out a path that could save her over $18,000 in interest payments over the next decade.
That conversation reminded me why I'm so passionate about helping people understand their options when it comes to second mortgage refinancing. It's not always straightforward, but with home equity levels at record highs and rates finally trending down from their 2024 peaks, 2026 might be the perfect time to take another look at that home equity loan or HELOC you took out a few years ago.
Think of it like this: your second mortgage doesn't have to be set in stone just because you signed the papers years ago. Financial situations change, market conditions shift, and your goals evolve. Sometimes refinancing that second mortgage can free up hundreds of dollars every month, or it can simply give you the peace of mind that comes with predictable payments.
Yes, absolutely. Let me simplify this for you. You have multiple pathways depending on what you're trying to accomplish with your finances right now.
If you have both a first mortgage and a second mortgage like a home equity loan or HELOC, you can refinance them separately or together. The textbook answer is that you need to meet certain qualification requirements. But really, what matters most is understanding which approach makes sense for your specific situation, and I'll walk you through each one.
This is what we call a cash-out refinance in the industry, though technically you're just consolidating existing debt. You take out one new, larger mortgage that pays off both your current first and second mortgages. The result? One monthly payment instead of two, and potentially a lower overall interest rate depending on market conditions.
According to Zillow's latest rate data, the average 30-year fixed refinance rate was 6.36% as of early November 2025. If your second mortgage carries a rate of 8% or higher, combining everything into one loan at current rates could generate real savings.
Maybe you're perfectly happy with your first mortgage rate, especially if you locked in something below 4% during 2020-2021, but that adjustable-rate HELOC is driving you crazy with its fluctuations. You can refinance just the second mortgage, converting it to a fixed-rate home equity loan without touching your primary mortgage at all.
This approach works particularly well when your first mortgage has a rate that's lower than what you could get today. Why mess with a good thing, right?
Here's where it gets interesting. Say you want to refinance your primary mortgage to take advantage of lower rates or change your loan term, but you also want to keep that HELOC in place because you're still using it for ongoing projects. You can do this through a process called resubordination.
Basically, your second mortgage lender agrees to remain in the "second position" subordinate to your new first mortgage after you refinance. Most lenders will do this, usually for a fee between $75 and $250, though requirements and costs vary by lender.
Before we dig deeper into refinancing strategies, let me break down what we're actually talking about when we say "second mortgage." As the name suggests, it's any mortgage loan beyond your primary home loan. This creates two separate monthly payments and two different liens against your property.
The key thing to understand: because second mortgages are in the subordinate position, second in line if you default, lenders view them as riskier. If foreclosure happens, the first mortgage gets paid first from the proceeds, and the second mortgage lender gets whatever's left. That extra risk is why second mortgage rates typically run 0.5-2 percentage points higher than first mortgage rates.
Common reasons homeowners take out second mortgages include consolidating high-interest credit card debt, funding major home renovations, covering college tuition, or making a down payment on an investment property. In my MSW program, we learned about how financial stress impacts families. Second mortgages, when used strategically, can actually reduce that stress by eliminating multiple high-interest debts.
A home equity loan works almost exactly like your primary mortgage. You borrow a specific amount based on your available equity, which is the difference between your home's value and what you owe, receive the money as a lump sum, and pay it back over a fixed term with a fixed interest rate.
Let's work through a quick example to make this concrete. Say your home is worth $350,000 and you owe $210,000 on your primary mortgage. That gives you $140,000 in equity. Most lenders will let you borrow up to 80-85% of your home's value across all mortgages combined, which means you could potentially access $35,000 to $87,500 through a home equity loan, depending on the lender's specific loan-to-value requirements.
How Home Equity Loans Actually Work
You apply, go through underwriting similar to getting your first mortgage, and if approved, you receive all the money at once at closing. Then you make fixed monthly payments that include both principal and interest, just like your primary mortgage. The predictability is one of the biggest advantages. Your payment amount never changes unless you refinance or pay extra.
One benefit I don't see enough people taking advantage of: if you use the funds for substantial home improvements, the interest you pay might be tax-deductible. The IRS allows you to deduct interest on up to $750,000 in combined mortgage debt, or $375,000 if married filing separately, when the loan proceeds go toward buying, building, or substantially improving your home. Always consult with a tax professional about your specific situation, but this can create meaningful savings come tax season.
Now HELOCs work differently, and honestly, I think they're misunderstood more than any other mortgage product. A HELOC functions more like a credit card backed by your home equity. You're approved for a maximum credit limit based on your equity, but you only borrow and pay interest on what you actually need.
The Two Phases of a HELOC
Draw Period, typically 5-10 years: During this phase, you can borrow money, pay it back, and borrow again, up to your credit limit. Most HELOCs require only interest payments during the draw period, which keeps your monthly costs lower initially. But here's what catches people off guard. That interest-only payment can feel manageable at first, then become problematic once the repayment period starts.
Repayment Period, typically 10-20 years: Once the draw period ends, you can't borrow anymore, and you begin paying back both principal and interest. This transition often causes payment shock. I've seen monthly payments double or even triple when this happens, especially if someone maxed out their HELOC during the draw period.
Most HELOCs have variable interest rates tied to the prime rate, which means your rate and payment can change. According to the Federal Reserve Bank of New York's Q2 2025 report, HELOC balances increased for the 13th consecutive quarter, rising by $9 billion to reach $411 billion nationally.
When HELOC Refinancing Makes Sense
If you're approaching the end of your draw period or your variable rate has climbed significantly, refinancing your HELOC to a fixed-rate home equity loan can provide stability. You'll lock in a rate, know exactly what your payment will be every month, and eliminate the anxiety of rate fluctuations.
At AmeriSave, we help homeowners evaluate whether refinancing their HELOC makes financial sense given their current rate, remaining balance, and financial goals. The conversation usually starts with understanding where rates are today compared to where they might go in the future.
Okay, so piggyback mortgages are less common now than they were before 2008, but they're worth understanding because some homeowners still have them and might want to refinance.
The structure is simple: when you buy a home, you take out a first mortgage for 80% of the purchase price, a second mortgage, usually a home equity loan or HELOC, for 10%, and make a 10% down payment. This avoids private mortgage insurance, which is typically required on conventional loans when you put down less than 20%.
Why Consider Refinancing a Piggyback?
If you took out a piggyback mortgage when you bought your home and have built up more equity since then, you might be able to refinance into a single mortgage without PMI. This simplifies your finances and could potentially lower your overall interest costs.
Let me walk through the math. Say you bought a $400,000 home with an 80-10-10 structure. You'd have a $320,000 first mortgage, a $40,000 second mortgage, and you'd pay $40,000 down. If your home is now worth $450,000 and you've paid down some principal, you might have enough equity to refinance into one $340,000 mortgage at today's rates without PMI, eliminating that second payment entirely.
Let me be straight with you about rates because I think there's a lot of confusion around why second mortgage rates are higher and what you can actually do about it.
Second mortgages almost always carry higher interest rates than first mortgages, usually anywhere from half a percentage point to two full percentage points higher. The national average home equity loan rate was 8.02% as of late October 2025, per Bankrate's survey. That's the lowest we've seen since early 2023.
For comparison, average 30-year fixed mortgage rates, were around 6.63% in early November 2025. That's a difference of about 1.4 percentage points, which might not sound like much, but on a $50,000 loan over 15 years, it's the difference between paying about $32,000 in interest versus roughly $38,000. A $6,000 gap.
Some factors you can control, others you can't. Let me break down both categories so you know where to focus your energy.
Factors Outside Your Control:
The Federal Reserve's monetary policy decisions have a huge impact. The Fed cut rates by 0.25 percentage points in both September, October, and December 2025, which helped push home equity loan rates to their current lows. But the Fed doesn't set mortgage rates directly. They influence them through their benchmark federal funds rate, which affects what banks charge each other for overnight loans.
Bond market trends matter too, particularly movements in 10-year Treasury yields. Mortgage rates tend to track these yields pretty closely because both compete for investor dollars. When Treasury yields rise, mortgage rates usually follow.
Economic conditions like inflation, employment data, and housing market supply and demand all play roles in shaping the rate environment.
Factors You CAN Control:
Your credit score: This is probably the single biggest factor within your control. Lenders typically want to see FICO scores of 740 or higher for the best rates. Each 20-point drop in your score can cost you 0.25-0.50 percentage points. If your score is currently 680 and you can work it up to 740 before refinancing, you might save $40-$80 per month on a $50,000 loan.
Your debt-to-income ratio: Lenders calculate this by dividing your total monthly debt payments by your gross monthly income. Most prefer to see a DTI of 43% or lower, though some will go higher. Paying down credit cards or other debts before applying can improve this ratio and potentially qualify you for better terms.
Your loan-to-value ratio: This compares your total mortgage debt to your home's value. The more equity you have, meaning a lower LTV, the better your rate. An LTV of 70% will typically get you better terms than 85%, because there's more cushion for the lender if something goes wrong.
Closing costs and points: You can sometimes buy down your rate by paying discount points upfront. One point equals 1% of your loan amount and typically reduces your rate by about 0.25%. On a $50,000 loan, that's $500 to potentially save $15-$20 per month. Whether this makes sense depends on how long you plan to keep the loan.
This is a question I get all the time, and the answer isn't always intuitive. Even if second mortgage rates are higher than first mortgage rates, refinancing can absolutely still be worthwhile under certain circumstances.
Consolidating Higher-Interest Debt
The average credit card interest rate hovers around 20-24% right now. Graduate student loans can range from 7-9%. If you're using a second mortgage refinance to consolidate this kind of high-interest debt, you could save hundreds of dollars monthly even with an 8% home equity loan rate.
I just want to be clear about the risk here: you're converting unsecured debt like credit cards and personal loans into secured debt backed by your home. If you run into financial trouble and can't make payments, you could lose your house. So this strategy only makes sense if you're committed to not running up new credit card debt after consolidation.
Switching from Variable to Fixed
If you have a HELOC with a variable rate that's been climbing, refinancing to a fixed-rate home equity loan provides certainty and often lower overall costs. Variable rates on HELOCs averaged around 7.90% in late 2025, but they can fluctuate significantly. Locking in a fixed rate around 8.02% eliminates that uncertainty.
Okay, let me share some practical strategies that actually work, based on conversations I've had with hundreds of homeowners over the years. Just last week, I was talking to a borrower in Louisville who'd improved her credit score by 45 points in three months just by following these steps.
If you're not in a rush, take a few months to boost your credit score before refinancing. Here's what makes the biggest difference:
If your DTI is above 43%, focus on paying down debts before refinancing. Even getting it from 46% to 42% can make you eligible for better loan programs with lower rates.
Sometimes it makes sense to use savings to pay down high-interest debt before refinancing, then rebuild your emergency fund with the money you're saving from lower monthly payments. The math doesn't always work out this way, but it's worth calculating.
I can't stress this enough: don't just go with the first offer you receive. Different lenders have different pricing models, and rates can vary by half a percentage point or more for the same borrower.
Get quotes from at least 3-5 lenders, including your current mortgage lender. Sometimes staying with your current servicer can save you money on fees, though not always. Make sure you're comparing offers using the same loan amount and term so you're looking at apples-to-apples scenarios.
Paying discount points to buy down your rate can make sense if you plan to keep the loan for several years. Here's a rough guideline: you need to keep the loan long enough for your monthly savings to exceed the upfront cost.
For example, if paying one point, which is $500 on a $50,000 loan, saves you $20 per month, you'll break even after 25 months. If you're confident you'll keep the loan for at least 3-4 years, paying points often makes financial sense.
Banks don't want to lose customers, so sometimes your current lender will offer you a better rate than what you'd get as a new customer elsewhere. It never hurts to ask, "What can you offer me to keep my business?" The worst they can say is no.
Alright, let's walk through the actual process so you know what to expect. This isn't as complicated as it might seem, though there's definitely paperwork involved.
Before you call any lenders, get clear on what you're trying to accomplish. Are you looking to lower your interest rate and monthly payment? Switch from a variable rate to a fixed rate? Combine your first and second mortgages into one? Change your loan term, shorten or lengthen it? Access additional cash for home improvements or debt consolidation?
Your goal will determine which refinancing approach makes the most sense.
Pull your credit score, calculate your DTI ratio, and figure out your home's current value and your available equity. Most lenders require you to keep at least 15-20% equity in your home after refinancing.
Here's a quick worksheet to organize your numbers:
Financial Metric
Your Numbers
Home's current market value
$_______
First mortgage balance
$_______
Second mortgage balance
$_______
Combined mortgage debt
$_______
Available equity at 80% LTV
$_______
Total monthly debt payments
$_______
Gross monthly income
$_______
DTI ratio
_______%
Start gathering quotes from multiple lenders. When you request quotes, they'll do a "soft pull" of your credit that doesn't affect your score. Once you actually apply, they'll do a "hard pull" which can temporarily lower your score by a few points, but multiple mortgage applications within a 45-day window typically count as a single inquiry.
Pay attention to both the interest rate and the APR, which includes fees and gives you a better sense of the true cost of the loan. A loan with a slightly higher rate but lower fees might actually cost you less overall, especially if you don't plan to keep the loan for the full term.
Once you've chosen a lender and submitted a formal application, you'll need to provide documentation. The typical requirements include:
Having all this ready before you apply can speed up the process significantly. I usually tell people to create a digital folder with scanned copies of everything so you can quickly share documents when the lender requests them.
Your lender will check your credit, but you should review your reports first to catch any errors that might hurt your chances. Lenders typically use FICO scores when evaluating mortgage applications, and they usually take the middle score from all three credit bureaus: Equifax, Experian, and TransUnion.
The minimum credit score for most second mortgage refinances is 620, but you'll need 740 or higher to qualify for the best rates. If your score is below 700, it might be worth waiting a few months to improve it before refinancing.
Your lender will order a home appraisal to verify your property's current value. This typically costs $300-$600 and is required for most refinances. The appraiser will visit your home, measure it, take photos, and compare it to recent sales of similar homes in your area.
If the appraisal comes in lower than expected, it could affect how much you can borrow or whether you qualify at all. This happened to a client of mine recently. The appraisal came in $20,000 below what she expected based on online estimates, which meant she didn't have enough equity to consolidate both mortgages like she'd planned. We ended up refinancing just her second mortgage instead.
Once you're approved and everything's verified, you'll receive your Closing Disclosure at least three business days before closing. This document shows your final loan terms, closing costs, and monthly payment. Review it carefully and compare it to the Loan Estimate you received earlier.
At closing, which can often be done remotely with e-signatures now, you'll sign the final paperwork and pay any closing costs that aren't being rolled into your loan. The lender will use your new loan to pay off your existing second mortgage, and you'll start making payments on your new loan.
The whole process typically takes 30-45 days from application to closing, though it can be faster or slower depending on how quickly you provide documents and whether any issues arise with the appraisal or title search.
This scenario comes up more often than you'd think, and it requires some additional coordination.
When you have multiple mortgages on your home, they're recorded in order. Your first mortgage is in "first position" and has priority if you default. They get paid first in a foreclosure. Your second mortgage is in "second position" and only gets paid after the first mortgage is satisfied.
When you refinance your first mortgage, technically that's a new loan, which would normally put it behind your existing second mortgage in line. But no lender will give you a new first mortgage if it's actually in second position. That defeats the whole purpose.
This is where resubordination comes in.
Resubordination is a formal agreement where your second mortgage lender agrees to maintain their subordinate position after you refinance your first mortgage. Essentially, they're saying, "We're okay staying in second place even though technically our loan is older."
The Resubordination Process:
First, you apply to refinance your first mortgage. Your new lender discovers you have a second mortgage. They contact your second mortgage lender to request resubordination. Your second mortgage lender reviews your current financial situation. If approved, they sign a subordination agreement. Your new first mortgage closes and takes priority. Your second mortgage remains in second position.
Most second mortgage lenders will agree to resubordination, but they're not required to. They'll typically charge a fee, usually $75-$300, and they want to make sure the refinance doesn't substantially increase their risk.
When Second Mortgage Lenders Might Refuse: If your LTV ratio will exceed 95% after the refinance. If you're doing a large cash-out refinance that leaves them with very little equity cushion. If you're significantly behind on payments. If the property value has dropped substantially since you took out the second mortgage.
If your second mortgage lender refuses to resubordinate, you have two options: either pay off the second mortgage as part of your first mortgage refinance, consolidating them into one loan, or don't refinance your first mortgage at all.
If you want to simplify your finances and have just one payment, you can refinance both mortgages into a single new loan. This is technically called a cash-out refinance, even if you're not taking any extra cash beyond paying off both existing mortgages.
Here's how the numbers might work:
Loan Component
Amount
Current first mortgage balance
$180,000
Current second mortgage balance
$45,000
Total debt to refinance
$225,000
Home's current value
$350,000
New loan amount with closing costs
$230,000
LTV after refinance
66%
With an LTV of 66%, you have plenty of equity cushion, which should qualify you for favorable refinance terms. Your closing costs, typically 2-6% of the loan amount, so $4,500-$13,500 on a $225,000 loan, can often be rolled into the new mortgage if you don't want to pay them upfront.
The big advantage: One payment, one interest rate, simpler financial management.
The potential downsides: If your current first mortgage has a great rate like 3.5% from 2021, replacing it with a 6.5% rate might not make financial sense. You might pay more in total interest over the life of the loan if you restart a 30-year term. Closing costs on a larger loan are higher.
Do the math carefully here. Sometimes it makes sense to keep that low first mortgage rate and just refinance the second mortgage separately.
Let me walk you through some real calculations so you can see how to evaluate whether refinancing will actually save you money.
Your break-even point is how long it takes for your monthly savings to exceed your upfront closing costs. Once you pass this point, you're actually coming out ahead from the refinance.
Example Scenario:
Current Loan Details
Balance: $60,000
Rate: 9.5%
Payment: $627
Years remaining: 12
Refinance Offer
New rate: 8.0%
New term: 15 years
New payment: $573
Closing costs: $2,400
Monthly savings calculation: $627 - $573 = $54
Break-even calculation: $2,400 / $54 = 44.4 months (about 3 years and 8 months)
If you plan to stay in the home and keep the loan for at least 4 years, this refinance makes sense. Over 15 years, you'd save about $9,720 in payments, which is $54 multiplied by 180 months, minus the $2,400 in closing costs, for a net savings of $7,320.
But there's more to consider than just monthly payment savings.
Sometimes a lower monthly payment doesn't actually save you money if you're extending your loan term significantly. Let's compare two scenarios:
Wait a second. Even though your monthly payment drops by $54, you'd actually pay $15,252 more over the life of the loan because you're taking 3 extra years to pay it off. That's $105,540, less $90,288.
This is why I always encourage people to look at both the monthly payment AND the total cost. If you refinance to a 15-year term but plan to make extra principal payments to pay it off in 12 years anyway, you get the lower rate without extending your repayment timeline. But many people don't actually follow through with those extra payments once the pressure's off.
If you're close to paying off your second mortgage, say within 2-3 years, refinancing usually doesn't make sense even if you can get a lower rate. The closing costs eat up most of the savings, and you're essentially restarting the clock on your debt freedom.
And if you're planning to move within the next few years, you might not stay in the home long enough to reach your break-even point.
Let me lay out both sides honestly, because refinancing isn't always the right move.
Lower Monthly Payments
This is the most common reason people refinance, and it's compelling. Even a 1% rate reduction on a $50,000 second mortgage can save you $30-$50 per month, which adds up to $360-$600 annually. For many families, that's a meaningful amount that can go toward groceries, an emergency fund, or extra principal payments on other debts.
Simplified Finances
If you refinance both mortgages into one loan, you eliminate one payment from your monthly routine. That might not sound like much, but I can't tell you how many people have told me they feel less stressed with one mortgage payment instead of two. It reduces the mental load of tracking multiple due dates and dealing with multiple servicers.
Interest Rate Stability
Converting from a variable-rate HELOC to a fixed-rate home equity loan eliminates the uncertainty of rate fluctuations. You know exactly what you'll pay every month for the life of the loan. In my experience, this predictability is incredibly valuable for budget planning and financial peace of mind.
Potential Tax Benefits
If you use the refinance proceeds for substantial home improvements, your interest payments might be tax-deductible. The Tax Cuts and Jobs Act allows deductions on mortgage interest for loans up to $750,000, or $375,000 if married filing separately, when the funds are used to buy, build, or substantially improve your home. Keep detailed records and consult a tax professional to make sure you're eligible.
Access to Your Equity
A cash-out refinance lets you tap into additional equity if you need funds for other purposes. Maybe you want to consolidate credit card debt that's costing you 22% interest, or fund a kitchen renovation that'll increase your home's value. With the average homeowner now holding over $300,000 in equity according to recent industry data, there's substantial borrowing power available for many families.
Refinancing Costs Money Upfront
Closing costs typically range from 2-6% of your loan amount, which can be several thousand dollars. On a $50,000 refinance, you might pay $1,000-$3,000 in fees for appraisal, title search, origination, and other costs. Some lenders offer "no-closing-cost" refinances, but usually this just means they're rolling the fees into your loan amount or charging a slightly higher interest rate.
You're Putting Your Home at Risk
Any time you take on mortgage debt, you're using your home as collateral. If you can't make payments for any reason like job loss or medical emergency, the lender can foreclose and you could lose your house. This risk is why I always urge people to have a solid emergency fund, ideally 3-6 months of expenses, before taking on additional mortgage debt or increasing their existing mortgage balance.
You Might Pay More Interest Over Time
If you refinance to a longer term, you could pay significantly more in total interest even if your monthly payment drops. The example I showed earlier where the monthly payment decreased by $54 but the total cost increased by over $15,000 is not uncommon.
Prepayment Penalties on Your Current Loan
Some second mortgages, particularly older HELOCs, have prepayment penalties if you pay off the loan early. Check your current loan documents before refinancing. If you'll owe a $2,000 penalty for early payoff, factor that into your break-even calculation.
The Process Takes Time and Effort
Refinancing requires a significant time commitment. You'll spend hours gathering documents, shopping for lenders, completing applications, and reviewing loan documents. For some people, the hassle isn't worth the savings, especially if we're only talking about $30-$40 per month.
Market Timing Risk
If you're converting from a fixed-rate to a variable-rate loan, which is rare but it happens, you're exposed to rate increases. And if you refinance now but rates drop significantly next year, you might regret locking in too early.
Let me share some examples based on actual situations I've encountered, with details changed to protect privacy.
Sarah's situation: She took out a $75,000 HELOC in 2021 when rates were low, with an adjustable rate that started at 3.25%. By early 2025, her rate had climbed to 9.25%, increasing her payment from $550 to $780 per month.
The solution: We refinanced her HELOC into a 15-year fixed-rate home equity loan at 8.0%. Her new payment was $717, still higher than her original HELOC payment but $63 lower than what she was currently paying. More importantly, she gained payment certainty with no more worrying about rate increases.
The math: Closing costs were $2,200. Monthly savings: $63. Break-even: 35 months. Since she planned to stay in her home for at least 10 more years, this was a clear win. Over 15 years, she'll save approximately $11,340 in payments.
Miguel's situation: He had a $30,000 home equity loan at 8.5% and $25,000 in credit card debt averaging 21% interest. His monthly minimums totaled $1,350, and he was barely making progress on the principal.
The solution: He did a cash-out refinance on his first mortgage, paying off both the home equity loan and the credit cards. His new first mortgage increased from $185,000 to $240,000, but his rate only went from 5.25% to 6.5% because he had excellent credit. His new payment: $1,516 monthly for everything, compared to $1,920 before. That included $570 for his first mortgage, plus $350 for the equity loan, plus $1,000 for credit cards.
The math: He saved $404 per month, which he started putting toward extra principal payments. The key here was his commitment to not running up new credit card debt. Otherwise he'd have been in worse shape.
James and Lisa's situation: They had a first mortgage at 3.5%, locked in during 2021, with a $280,000 balance, and a $50,000 home equity loan at 9% they'd taken out in 2023. Two payments, two servicers, two potential points of failure each month.
The solution: Instead of consolidating everything, which would have replaced their great 3.5% rate with a 6.5% rate, James refinanced just the home equity loan to 7.75%, saving about $65 per month and keeping his first mortgage untouched.
The math: Closing costs were $1,800. It wasn't the biggest dollar savings, but the combination of lower payments and maintaining their excellent first mortgage rate made it worthwhile. They reached break-even in 28 months.
Patricia's situation: She had a $40,000 home equity loan with only 3 years remaining at 8.5%. She was offered a refinance to 7.5% for 10 years.
Why she passed: Her monthly payment would drop from $565 to $473, saving $92 monthly. But closing costs were $2,100. More importantly, refinancing would mean taking 10 years to pay off debt she'd otherwise clear in 3 years. The total interest over 3 years on her current loan: $4,340. The total interest over 10 years on the new loan: $16,760. Even with the lower rate, she'd pay $12,420 more by refinancing.
The better move: She kept her current loan and used the $92 monthly difference to make extra principal payments, which allowed her to pay it off in just 2.5 years instead of 3.
I've seen these errors repeatedly over the years, and they're all avoidable if you know what to watch for.
Its tempting to jump at any refinance that lowers your monthly payment, but remember to calculate the total cost over the life of the loan. Sometimes a higher monthly payment on a shorter term saves you tens of thousands of dollars in interest.
The first offer you receive is rarely the best. Rate differences of 0.5% or more between lenders are common. On a $50,000 loan, that 0.5% difference equals about $1,500 in extra interest over 10 years.
If you're consolidating a first mortgage that has a 3.5% rate into a new 6.5% mortgage just to eliminate a higher-rate second mortgage, you might be making a mistake. Run the numbers carefully to see if you're better off refinancing only the second mortgage.
"No-closing-cost" refinances sound great, but those costs don't disappear. They're either added to your loan balance or you're paying a higher interest rate. Make sure you understand the true cost structure.
If you're 10 years into a 15-year home equity loan, refinancing to a new 15-year term means you're now looking at 25 years total to pay off that debt. Sometimes it makes sense to refinance to a shorter term even if the monthly payment is higher.
Cash-out refinances can be useful, but only if you have a specific, financially sound purpose for the money. Using home equity to fund a vacation or buy a boat is almost always a bad idea. You're converting short-term spending into long-term debt secured by your home.
If you're planning to move in 2-3 years, a refinance with a 5-year break-even point doesn't make sense. Always factor in your timeline before refinancing.
We know that every homeowner's situation is different at AmeriSave. That's why we work with you to help you decide if refinancing your second mortgage is the right move for your financial goals.
The first step in our process is to figure out where you are now and where you want to be. Are you trying to lower your monthly payments so you have more money to spend? Want to get rid of the uncertainty that comes with a variable-rate HELOC? Do you want to combine high-interest debt? Or maybe you just want to make your money easier to manage by combining several mortgages into one?
We can help you look at your options once we know what you want to achieve. These options might include refinancing just your second mortgage, combining both mortgages into one, or looking into other strategies that might work better for you.
We want to make sure you have all the information you need to make the best choice for your financial future, whether you choose to refinance with us or not.
In short: Is it a good idea for you to refinance your second mortgage?
There is no one-size-fits-all answer to the question of whether or not to refinance a second mortgage. For some homeowners in certain situations, it makes sense to get new loans. For others, it is better to keep their current loans.
The most important thing is to be honest with yourself and do the math. Check both the changes in your monthly payments and the total cost of the loan over its term. Think about how long you plan to live in your home. Think about where you are now with your money and where you want to go in the future.
If you've been thinking about refinancing, now might be a good time to do so. Home equity loan rates are at their lowest since early 2023. The Federal Reserve cut rates three times in late 2025. But just because rates have gone down doesn't mean you should rush into anything. Make sure that the numbers really help you.
If you're thinking about refinancing your second mortgage, take a few minutes to get your current loan and financial information together, then contact a few lenders for quotes. The worst thing that could happen is that you find out that refinancing isn't the best option for you right now. Even that is useful information. The best thing that could happen is that you find out you can save thousands of dollars over the next few years.
AmeriSave is here to help you with the numbers or talk about your specific situation. Check today's rates first, or call us to talk about your choices.
Just because you signed the papers a few years ago doesn't mean your mortgage has to last forever. Things change in the economy, the market, and new chances come up. The homeowners who save the most money are the ones who look over their mortgages every so often and make smart changes when the time is right.
It's hard, but not impossible. Most lenders want you to have a credit score of at least 620 before they will refinance your second mortgage. If your score is below 700, though, you may have to pay higher interest rates. If your credit score needs some work, you might want to wait 3 to 6 months before applying to improve it. Paying off credit card balances to less than 30% of their limit and making sure all payments are on time can make a big difference. A better score will often get you a lower interest rate, which is better than waiting to refinance. Last spring, I helped a client raise her score from 645 to 710 in just four months. This saved her almost $80 a month on her refinance compared to what she would have been able to get before.
After refinancing, most lenders want you to keep at least 15–20% equity in your home. This means that the total loan-to-value ratio for all of your mortgages should be no higher than 80–85%. If your home is worth $300,000, your total mortgage debt after refinancing shouldn't be more than $240,000 to $255,000. If you're close to the edge of your equity, you might want to make extra principal payments for a few months to give yourself more room, or you could wait for your home's value to go up. If you're close to the limit, it can help to shop around because some lenders are more flexible than others when it comes to LTV requirements.
If you're getting close to the end of your HELOC's draw period or if your variable rate has gone up a lot, this often makes sense. When you refinance to a fixed-rate home equity loan, your payments will be stable and predictable. If you want the freedom to borrow and pay back money when you need it, though, it might be better to keep the HELOC. Think about where you are in life right now and whether you'll need to use that revolving credit line soon. One thing to keep in mind is that some HELOCs charge fees for closing early, so read your current loan documents before switching.
Yes, but the rules are usually stricter than they are for primary residences. You'll usually need better credit (at least 680-720), more equity (at least 20-30%), more cash reserves (enough to cover six months of all property payments), and higher interest rates (usually 0.5-1 percentage point higher than rates for primary homes). Lenders see investment properties as riskier because you're more likely to stop paying rent on a rental property than on your main home if you run into financial trouble. There are also more paperwork requirements. You may need to show rental income history and maybe tax returns that show how much money the property makes.
The usual time frame is 30 to 45 days from the time you apply until the time you close, but it could be shorter or longer depending on how quickly your lender works and how quickly you send in the necessary paperwork. The steps are to fill out an application, check your credit, verify your income and assets, have your home appraised, have the underwriting reviewed, and then close the deal. When you apply, make sure all your paperwork is in order and ready. Also, respond quickly to any requests from the lender and take the initiative to set up the appraisal. If you need to close faster, some lenders will process your application faster for an extra fee. The appraisal itself usually takes 1 to 2 weeks from the time you place your order to the time it is finished. This is often the longest step in the process.
The closing costs for a second mortgage refinance are usually between 2% and 6% of the loan amount and can include a number of different things. Depending on where you live and what kind of property you have, appraisal fees can range from $300 to $600. The origination fee is usually between 0.5% and 1% of the loan amount. The cost of a title search and insurance is between $500 and $1,500. The cost of a credit report is usually between $30 and $100. Depending on where you live, recording fees range from $50 to $250. It costs between $15 and $25 to get flood certification. Some lenders will pay some fees, but this usually means a higher interest rate. Get a detailed Loan Estimate within three business days of applying so you can see how much each lender will charge you in total. You should also think about any fees for paying off your current loan early.
Absolutely, though you'll need to provide more documentation than W-2 employees. Lenders usually want two years of personal and business tax returns, profit and loss statements for the current year, and bank statements that show how much money the business made. They'll look at how stable your income is and may average your earnings over two years to figure out what you can get. If your income changes a lot or has gone down recently, it might be harder to get approved. The process will go more smoothly if you work with a lender who has experience with self-employed borrowers. Some lenders offer alternative documentation loans for business owners, but these usually have higher rates. Be ready to explain any big deductions on your tax returns. Lenders will add back some non-cash costs when they figure out how much money you can borrow.
The interest rates are the main thing that will affect this. If your first mortgage has a great rate, like 3–4% from 2020 to 2021, it's usually best to leave it alone and refinance the second mortgage on its own. You'll still have to make two payments, though. But if your first mortgage rate is 6% or higher, combining both into one new mortgage at current rates of 6.5% to 7% might make things easier for you without costing you much more. Do the math both ways. Before you make a decision, figure out how much you will pay each month and how much interest you will pay over the life of the loans in each case. If having just one payment is important to you, don't forget to think about how it will affect your mental health.
You have to pay off both of your mortgages when you sell your home, usually with the money you get from the sale at closing. Before you get any extra money, the title company that is handling the sale will pay off both mortgages with the money you make from the sale. If you owe more on your mortgages than your home is worth, you'll need to bring cash to closing to make up the difference, or you can work out a short sale with your lenders. This is why it's so important to know how much your home is worth and how much you owe on your mortgage. If you want to sell soon, it probably doesn't make sense to refinance your second mortgage unless the savings are big enough to cover your closing costs quickly.
Yes, and this is usually the best thing to do if your first mortgage has a low interest rate. You can refinance your second mortgage without changing anything about your first mortgage. They are two different loans. You won't need to get approval for resubordination because you're not changing the position of your first mortgage. This plan could help you get a lower interest rate on your second mortgage while keeping the great terms of your first mortgage. I see this situation a lot with homeowners who got first mortgages with rates below 4% in 2020 and 2021 but then took out HELOCs or home equity loans at much higher rates more recently. They can get the lower rate they need by refinancing only the second mortgage, which means they don't have to give up that great first mortgage rate.
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