Mortgage Consolidation & Refinance Calculator
Are you a homeowner looking to simplify the monthly payment you’re making on your home. Perhaps you’re considering a refinancing of your current mortgage to a lower rate, or maybe you’re thinking about consolidating a first and second mortgage into a single mortgage. If so, this calculator will help you decide what course of action is most advantageous to your bottom line.
First enter the information pertaining to your first mortgage, including the principal balance, monthly payment amount, and the current interest rate attached to the loan. If applicable, include the same information for your second mortgage. Follow that with the interest rate and the number of years you’ll be refinancing at. Then include closing costs as either percentage points or a dollar amount. Finish up by indicating whether or not you would like to finance these closing costs.
Click on CALCULATE and you’ll get a breakdown of the costs associated with your new mortgage compared with your current mortgage or mortgages. Best of all, you’ll see an estimate of what you could save with a lower interest rate.
Note: Ensure you only include the principal and interest portion of your monthly mortgage payment. Do not include any escrow portions (property taxes, insurance, etc.).
Explore Great Mortgage Options
This table helps homebuyers explore their mortgage options. You can click on the purchase button to switch away from refinance loans to purchase options & other loan features are included in the filter section which let you change the loan amount, the home's location, the downpayment on the home, the loan term & more.
Consolidating a First and Second Mortgage
Many homeowners take out a second mortgage when they need extra cash. It is a common practice for home improvements and upgrades, instances such as school tuition, or medical emergencies and unexpected expenses.
A second mortgage, also called a junior lien, is a loan you can take while using your home a collateral. It's a responsibility you take on in addition to still paying on the first loan that bought your home. The first mortgage is priority, however. If you default on your first home loan and your lender sells your home to pay your debt, your second lender is paid only after the first mortgage debt is settled. This risk causes lender to charge higher interest rates for second mortgages.
Your second mortgage is either a home equity loan, where you get all the money upfront, or a home equity line of credit. The line of credit option typically remains "open-ended," and acts much like a credit card with a limit.
When you have two mortgages, you are responsible for two monthly payments to keep your home.
Why Consolidate Your First and Second Mortgage
There are several reasons why you may consider consolidating your first and second mortgages. The primary benefit is that it will save you money. If you are having trouble keeping up with both mortgages or you are behind on other bills, consolidation will decrease the number of bills you have.
If you are in financial trouble, consolidation will increase the chances that you can keep your home.
Other benefits of consolidation include:
- A single monthly payment - It allows you to make one payment to one lender, freeing up extra cash.
- It may offer options to lower your monthly payments - Consolidation can cut extra fees and higher interest rates, leaving you to pay a decreased amount. Also, if interest rates are trending lower than they were when you secured your first and second mortgages, you may save in the long run.
- It looks better on your credit report - You can improve your financial health and eventually your credit score if you only responsible for one mortgage payment.
- You may get tax breaks - Interest payments may be tax-deductible. Talk to you lender and your financial advisor about your options
- You can get done with the loan more quickly - When you negotiate your new terms, you may be able to shorten the length of time it takes you to pay the loan back.
How to Consolidate Your First and Second Mortgages
As with any loan, it is necessary for you to thoroughly research any offer from a lender before you commit to a repayment agreement.
The lending process for a consolidation is much like your application to get your first and second mortgages. Visit multiple banking institutions before you decide on the loan. You will need to compare interest rates, the length of the loan, extra fees, the monthly payment, pre-payment penalties, and balloon payments.
Here is a checklist of what to consider during a consolidation:
- Current loan terms - A potential lender will evaluate the terms of both your current loans and your progress on repayment. Make sure you have all of your paperwork and up-to-date statements on both of your mortgages. You will also need to give personal information such as proof of income, assets, and other documentation.
- Include all current costs - The last thing you want to do is combine your mortgages only to discover that some fees were not included. Talk to both lenders to make sure that all debt, fees, and other expenses are part of the negotiations for a new loan.
- Assess new fees and costs - There will also be new costs to refinance the consolidated loans. Be sure that you are clear about what those terms include.
- Explore your options - Compare multiple lenders before you decide. Use online tools such as the Mortgage Consolidation & Refinance Calculator to estimate the costs of each offer. The calculator will give an estimate of the monthly payment and net interest savings (if applicable) and how many months it will take to break even on the closing costs (if applicable).
- Consider more lending institutions than banks - Don't only consider banks as an option for your consolidation. Research credit unions, savings and loans, and mortgage companies as well. You may find lower interest rates and fees or better benefits with another type of creditor.
- Appraisal of your home and the current housing market - There may have been many shifts in your local housing market since the terms of your first and second mortgages were negotiated. An appraiser will assess the market and the value of your home. Improvements to your home such as additions and renovations are considered, as well as deterioration of the home.
- Make sure your consolidated loan covers the first two mortgages - Your choice for the loan must provide enough to repay both the first and second mortgages.
Cash Out Refinancing Limits
When consolidating home loans many borrowers also choose to withdraw a portion of their equity from their home to pay off other debts. Lenders frequently allow borrowers to obtain up to 80% or even 85% of their home equity on conventional home loans.
Borrowers seeking to borrow above this amount will likely face additional scruitiny during the qualification process & if they are approved they are likely to pay significantly higher interest rates.
Government-backed programs have hard caps on the loan-to-value of refinances where equity is withdrawn. The limit on either FHA or USDA sponsored cash out refinance loans is a 80% LTV. Veterans who are refinancing VA home loans while taking cash out have an LTV limit of 90%.
Signs to Avoid Certain Lenders
Unfortunately, there are some lenders who will take advantage of people who ned help.
Other creditors may make offers to consolidate your first and second mortgages that seem just too good to be true -- and they probably are. Don't give up the potential benefit of a consolidation with a faulty new loan.
Here are some red flags to let you know which lenders to avoid:
- They won't give you copies of documents - The Truth in Lending Act (TILA) requires potential creditors to provide certain information for your review about fees and terms associated with the loan. It is illegal for them to withhold such information. You can file a violations complaint online with the Federal Trade Commission.
- They tell you to lie on your application - You never have a reason to be untruthful on your application. Any lender who encourages you to be inaccurate about income, home equity, or other information should be not be an option for your creditor.
- They pressure you to apply for more money than you need - Remember that you are the one responsible for repaying the loan. If someone is trying to convince you to get extra money that you will have to pay back, they do not have your best interests.
- They do a "bait and switch." - Any lender that promises you one set of terms but produces another set for you to sign is guilty bait and switch tactics. Be sure to carefully review any documents before you sign them to be sure the terms match previous conversations. You can also ask the lender to print out copies of the agreement for you to take home to review with someone you trust.
- They tell you to sign blank forms - Never sign a blank form with promises that the lender will complete the appropriate information at a later date. Before you agree to any terms and sign any corresponding documents, make sure every blank field is completed.
- They offer you smallest monthly payments that doesn't cover the loan's principal and fees - This is why it is important to make sure you understand all terms of the loan. If your payment doesn't cover all of your expenses, you will ultimately have a balance earning more interest.
Consolidation of your first and second mortgage can offer you some relief if you are stressed by your financial obligations. There are tools available to help you decide what you can afford. Always ask the right questions to make sure you are getting the best deal from a reputable lender.