With mortgage interest rates rapidly rising, now may be the time to refinance your variable interest rate home equity line of credit (HELOC) or adjustable rate mortgage (ARM) home equity loan into a fixed interest rate second mortgage. Otherwise, your payments could become more than you can afford, which could be dangerous because your HELOC is secured by the equity in your house.

By refinancing your existing home equity loan or line of credit you could save a lot of money in the long run. There are many places you can find a fixed interest rate second mortgage loan. These tips can help you keep your costs down and help you avoid unpleasant surprises at closing.

· First, order your credit report from all three credit reporting agencies and check it for errors. An inaccuracy you aren’t aware of could cost you thousands of dollars in extra interest or even cause a denial of credit.

· Find out what current mortgage rates are and whether they are going up or down. Knowing the current mortgage rates will give you bargaining power when you shop for your new loan.

· Talk with your existing lender about mortgage refinancing of your home equity line or variable interest rate 2nd mortgage. At the same time, contact at least one bank, one credit union and one direct mortgage lender. Their 2nd mortgage loans probably cost less than ones from finance companies and mortgage brokers, and one of them could possibly give you a better deal than your existing lender.

· Most lenders will loan you up to 85% of the value of your home based on the total of both the first and second mortgages. Steer clear of the 125% Loan To Value (LTV) second mortgages or any other loan that allow you to borrow beyond the value of your home. Mortgaging your home for more than it is worth is an easy way to lose it.

The other problem with 125% LTV loans is that you may not be able to claim all of the interest you pay on the loan. According to the Internal Revenue Service (IRS), there is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your primary residence and second home is limited to the smaller of:

- $100,000 ($50,000 if married filing separately),

- The total of each home’s fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt.

Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible, so you could lose the tax deduction benefit if you mortgage your house for more than it is worth.

· Find out what will you have to pay in points and fees. Remember, 1 point equals 1 percent of the loan amount (1 point on a $10,000 loan is $100). Reputable lenders normally charge between 1 and 3 percent of the loan amount in points and fees. If points and fees are more than 5 percent of the loan amount, you should probably shop for a different lender.

· Find out if the new loan carries a default penalty in case you are late or miss a payment. Default penalties could cause the interest rate to increase dramatically.

· Before you apply, pay close attention to the terms of a loan including the type of 2nd mortgage, the presence of prepayment penalties, balloon payments, low or high down payment, mortgage insurance requirements, payment schedule, lock-in period and other loan features. Are the terms better than yours? If not, keep shopping.

· Know your legal rights. The Federal Reserve Board states that if you’re using your home as security for any type of home equity loan, including a second mortgage, federal law gives you three business days after signing the loan papers to cancel the deal–for any reason–without penalty. You must cancel in writing within the three-business-day window of time, and the lender must return any money you have paid to date.

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Why you should get a second mortgage or home equity line of credit, instead of refinancing?

Well … you should!

Why Not?

First Mortgages typically have an interest in the second, that rant is twice or even three times as high as your first mortgage. You can refinance instead and keep a very low rate. In the long run, will only cost a second mortgage money in interest charges.

Second Home equity lines of credit> Mortgage Account Executives (seller) to sell your home in it as a credit card to your. They will try to convince you that from time to time.

A third refinance loan is better for the equity in your home. Very few companies refinance your home 100% of the value without you, a second mortgage. You do not want 100% of capital to be used because it means we no longer have that equity to fall backEmergencies.

Fourth Second mortgages and home equity lines of credit to provide managers (seller) with another tool going to affect in any other Commission in its pocket.

Fifth Your equity is a precious thing and should not to add unnecessary components or impulse buys are used. If you do not need and there is a possibility, however slim that you can not afford not obtained, then a second mortgage to buy it.

The only reason that I always recommenda second mortgage or home equity line of credit in an emergency. Only if there is no other way and you must take out a loan, I would recommend one or both of these options.

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With mortgage interest rates rapidly rising, now may be the time to refinance your variable interest rate home equity line of credit (HELOC) or adjustable rate mortgage (ARM) home equity loan into a fixed interest rate second mortgage. Otherwise, your payments could become more than you can afford, which could be dangerous because your HELOC is secured by the equity in your house.

By refinancing your existing home equity loan or line of credit you could save a lot of money in the long run. There are many places you can find a fixed interest rate second mortgage loan. These tips can help you keep your costs down and help you avoid unpleasant surprises at closing.

· First, order your credit report from all three credit reporting agencies and check it for errors. An inaccuracy you aren’t aware of could cost you thousands of dollars in extra interest or even cause a denial of credit.

· Find out what current mortgage rates are and whether they are going up or down. Knowing the current mortgage rates will give you bargaining power when you shop for your new loan.

· Talk with your existing lender about mortgage refinancing of your home equity line or variable interest rate 2nd mortgage. At the same time, contact at least one bank, one credit union and one direct mortgage lender. Their 2nd mortgage loans probably cost less than ones from finance companies and mortgage brokers, and one of them could possibly give you a better deal than your existing lender.

· Most lenders will loan you up to 85% of the value of your home based on the total of both the first and second mortgages. Steer clear of the 125% Loan To Value (LTV) second mortgages or any other loan that allow you to borrow beyond the value of your home. Mortgaging your home for more than it is worth is an easy way to lose it.

The other problem with 125% LTV loans is that you may not be able to claim all of the interest you pay on the loan. According to the Internal Revenue Service (IRS), there is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your primary residence and second home is limited to the smaller of:

- $100,000 ($50,000 if married filing separately),

- The total of each home’s fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt.

Interest on amounts over the home equity debt limit generally is treated as personal interest and is not deductible, so you could lose the tax deduction benefit if you mortgage your house for more than it is worth.

· Find out what will you have to pay in points and fees. Remember, 1 point equals 1 percent of the loan amount (1 point on a $10,000 loan is $100). Reputable lenders normally charge between 1 and 3 percent of the loan amount in points and fees. If points and fees are more than 5 percent of the loan amount, you should probably shop for a different lender.

· Find out if the new loan carries a default penalty in case you are late or miss a payment. Default penalties could cause the interest rate to increase dramatically.

· Before you apply, pay close attention to the terms of a loan including the type of 2nd mortgage, the presence of prepayment penalties, balloon payments, low or high down payment, mortgage insurance requirements, payment schedule, lock-in period and other loan features. Are the terms better than yours? If not, keep shopping.

· Know your legal rights. The Federal Reserve Board states that if you’re using your home as security for any type of home equity loan, including a second mortgage, federal law gives you three business days after signing the loan papers to cancel the deal–for any reason–without penalty. You must cancel in writing within the three-business-day window of time, and the lender must return any money you have paid to date.

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Taking out a second mortgage may sound easy since you’ve gone through the steps during the first mortgage. Still, people make mistakes with their refinance mortgage. Whatever their options, people should always weigh their capacity to pay back the loan given their unique circumstances.

Is It Time For You to Get a Refinance Mortgage?

No matter what they are saying, like interests rates are lower making the time right for a refinance or something like that, take a hold of yourself. Ask yourself if it is the right time for you to take out a new loan and if you’ve got a very good reason to get one.

The common reasons for taking out refinance mortgage:

1. Debt consolidation

2. Building up home equity

3. Switching mortgage type

4. Big expenses

5. Relocation

6. Business investment

Getting a second loan for the sake of cash in your pocket is not a good reason to take out a loan. A one-time fling with cold cash going nowhere except down the drain will be a drag to pay back for another 15 years.

With the second loan, borrowers are just taking a new loan and putting up the same property for collateral. In a way, the new loan provides you the opportunity to make good use of this second break. All along, you must always bear in mind your financial capacity to pay back the loan.

Lenders weigh the risks. They also check out your credit score and review your performance with the previous loan. If you are decided to get a second loan, for good reason, evaluate the options offered by the lenders’.

Your Mortgage Refinance IQ

To avoid the usual mistakes people make, you should:

1. Know how much mortgage you can afford.

2. Study the going rates.

3. Compare these rates with the present one.

4. Shop around for lenders and compare offers.

5. Study the low rate offered.

6. Add up all the fees you’ll be paying.

7. Ask the company if they charge for early loan payment.

The success of your mortgage refinance depends on the choice of mortgage type to suit your circumstances.

The Two Types of Mortgages

With your second mortgage, you will again have to make a choice between a fixed rate mortgage and flexible rate mortgage. Your experience with your first mortgage will determine how you will go.

Fixed Rate and Flexible Rate Mortgages

This type of mortgage offers you stability throughout the loan period. Whether the market goes up or down, you will continue to pay the same monthly payment. This is ideal for wage earners who have fixed sources of income.

The adjustable rate mortgage has its highs and lows and your payment goes with the tide. If rates are low, you make great savings on your monthly payments, and if the trend stays for quite a considerable time, it is an advantage. But when rates shoot up, refinance mortgage holders usually have to shell out more money than they can afford.

There are several types of refinance mortgage packages, but it still pays to go along with the type that will get you your second chance going without becoming overstressed.

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The Piggyback Second Mortgage provides an option to home buyer who can not afford a twenty percent down payment. Without enough funds for twenty percent down payment, the home buyer pays an expensive Private Mortgage Insurance (PMI). Mortgage Lenders are able to provide the usual ten percent second mortgage without PMI. Only a few mortgage lenders can provide fifteen or twenty percent second mortgage without PMI.

Another term for piggyback second mortgage are 80/10/10, 80/15/5, 80/20/0 mortgage. The 80/10/10 is the most popular. There are only a few who provide 80/15/5, and 80/20/0. The three numbers represents the percentage of first mortgage, second mortgage, and down payment. For example, the 80/10/10 means eighty percent first mortgage, ten percent second mortgage, and ten percent down payment.

The Advantages of Piggyback Second Mortgage

The demand for piggyback second mortgage increased lately. There are a few reasons. The monthly mortgage payment costs less than a mortgage with PMI. The PMI premium varies on different states and situation. The PMI protects the mortgage lender in case of default on mortgage payment. However, the PMI has no benefit at all to the home buyer.

The interest on first and second mortgage are tax deductible from the time being. Mortgage interests are actually one of the important tax deductions for home owners. In fact, some homeowners elect not to pay off mortgage early for tax purposes.

The home buyer avoids the higher interest for Jumbo Mortgage Loan. Every year, the government sets conventional mortgage limit for purchase. If the mortgage exceeds the conventional mortgage limit for purchase, the mortgage lenders considers the mortgage application as Jumbo Mortgage Loan. Since the Jumbo Mortgage Loan offer higher risk to mortgage lenders, the mortgage lenders give higher interest rate on Jumbo Mortgage Loan.

The Disadvantages of Piggyback Second Mortgage

The house prices goes up or down. As the house prices goes up, the equity on the house grows as well. When the home equity goes up to twenty two percent, the home owner can cancel the PMI. The Homeowners Protection Act of 1998 requires the removal of PMI on loans made after July 29, 1999 after the homeowners pay down twenty two percent of equity.

Mortgage Lenders made Piggyback Second Mortgage more difficult to acquire than traditional mortgage. To qualify for this mortgage, the home buyer needs 680 Fair, Isaac, & Co (FICO) score. The FICO score measures the individual record in using credit.

Second mortgage comes with its own costs. The home buyer pays the same kind of costs as the first mortgage. Furthermore, the home buyer pays the same penalties on mortgage payment default.

The final verdict on Piggyback Second Mortgage

The Piggyback Second Mortgage benefits the home buyers, but the second mortgage requires some crunching on numbers. With this second mortgage, the home buyers pay less mortgage payment, and income tax. The PMI providers are feeling the pinch on loss business. In the future, PMI could be a tax deductible as well. The House Resolution 3098 and Senate Bill 132 (which are currently on pending) allow deducting the PMI on income tax.

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