It’s not unusual for someone to have two mortgages. In fact, it’s pretty common. A lot of people do it, when they amass enough equity in their homes, either to pay off a debt, finance a business or to send a child to college. But having to deal with two loans can be time consuming. By consolidating them into one, however, you make life easier for you and also save some money.
How do you do it?
In order to consolidate your loans, you have to first know a few things about them. If, for example, your second loan was a cash-out loan, it may add cost to the new loan and reduce the amount for which you qualify. Any distinction matters, since the terms and the amount you will pay on new mortgages could be very different.
The good thing is that you don’t need to concern yourself with the paperwork that goes with consolidating the loans. Your lender will take care of that. But you still need to be informed. So don’t just talk to one lender, talk to several. Do it in person and try to speak with as many lenders as possible. Find out everything you can about the new loan. Will it be a cash-out loan? Or maybe a rate/term refi? Is it fixed or variable? Will it be for 15 or 30 years?
Once you choose a lender, they will walk you through the process. But don’t forget to read everything before signing the papers. You need to make sure that you understand the payment schedule, to avoid any unpleasant surprises.
Consolidating two loans into one is no easy task and deciding to do so is just as hard. If you’re looking to consolidate two existing loans, make sure that you’re making the right decision. Don’t do it based only on the reduction of your monthly payment, but also think about how long you plan to stay in the house, and other such factors. Afterwards, compare the cost of your current mortgages to the new mortgage plus the costs associated with it. If the latter is lower, consolidating the loan might be a good idea.