How do I Combine Mortgages on Properties?

Combining mortgages might save money if you consider all avenues.

Combining mortgages might save money if you consider all avenues.

When you own two properties or more, combining the mortgages into one payment is possible if you have enough equity in one property to cover the other. You have two options: using your home's equity, in the form of a loan or line of credit, or refinancing your mortgage. If you use your home's equity, you'll probably have a higher interest rate but save money from paying off the second mortgage. If you refinance, you'll probably get a lower interest rate but will have to pay closing costs. It's up to you on the route you take, but make sure paying off the second mortgage saves you money.

Look at the equity in both of your mortgages, and figure out which mortgage has enough equity to cover the other mortgage. For example, if you owe $100,000 on your main home that has a value of $250,000, and you owe $75,000 on your vacation home that has a value of $100,000, your main home has $150,000 in equity, which is enough to cover the $75,000 mortgage on your vacation home.

Talk to your current lender about refinancing and ask about the fees involved. Your current lender might be able to offer better terms than other lenders because you already have a rapport with it. Ask about the interest rates and fees for using the equity in your home. Compare the two and determine which offers the best terms.

Shop around for the refinancing rates of other lenders. Call several local and national banks and mortgage brokers. Write down the terms for each loan.

Compare each lender's offer. Once you decide on a lender, make an appointment to begin the refinance or an appointment with your current lender to use your home's equity.

Pay off the second mortgage once you receive the cash from you first home's equity or the refinance.

Tips

  • If both of your properties have enough equity to cover the other's mortgage, use your main home's equity to cover your second property. Lenders typically offer better rates on your main residence.
  • If the amount of your mortgage is more than 80 percent of the value of your home, you'll probably have to pay for private mortgage insurance, which will spike your monthly payments.
 

About the Author

Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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