Archive for 2nd Home Refinancing
Many people in the United States have vacation or investment properties but getting “mortgage refinancing” on a second home for a lower interest rate presents a whole new set of challenges. When people begin looking for ways to save money, the first place they often look is at their monthly mortgage payments. Typically this involves looking at a possible refinance of the home loan. However, refinancing your primary residence isn’t the only way you can save money. If you have multiple properties, reducing the interest rate on your second home or investment property could lower monthly payments and increase your cash flow. This includes any vacation homes or rental properties that you own. As long as the property is not considered owner occupied, meaning it is not your primary residence, you can find a good deal on your second home refinance.
We recommend a mortgage refinance with a fixed rate so you won’t have to worry about interest rates rising. The mortgage rate for a refinance on 2nd homes is typically .25 to .50 higher than rates on primary residences. In most cases you will need more equity to qualify for refinancing and very few lenders allow cash out for 2nd home loans.
First, the home must qualify as a second home. Otherwise you will be penalized with higher interest rates when you go to refinance the home. This means the home must be located a certain distance from your primary residence; usually 50 miles is the minimum distance that should separate your second home from your first. The second home must be used by you or your family at least 14 days per year. Once you are able to establish that the house is a second home then you may qualify for interest rates that are close to the rates offered for primary residences.
Lower Monthly Payments with a Low Rate Second Home Refinance
Typically second homes which are considered owner occupied do not require large amounts of equity in order to qualify for mortgage refinancing like primary homes do. This is another reason why you will want to make sure your second home is designated as such. It will be considered an investment home if you rent the property for income which means the bank will require a greater amount of equity in the home before they will consider letting you refinance it. This can certainly put a crimp in your plans if you were trying to get in on low interest rates.
Like any other refinance, you want to look at all of the numbers to make sure your refinance makes financial sense. Shop around for the best interest rates and don’t forget about the closing costs associated with refinancing your home. Determine if you want to actually pull money out of the home (cash in equity) or if you just want to refinance the principal so that the monthly mortgage payments are lower. If you need help, a financial planner can provide you with more information about refinancing a second home.