Oftentimes it may seem like a good idea to refinance to combine a first and second mortgages. If you have enough equity to keep your combined loans under 80% of the appraised value of your home this may work. There are some considerations however.
If you’re existing 2nd mortgage was not used to originally to purchase the home, it will be considered a “cash out” refinance and the lenders will charge a .50 discount point one time fee. Just multiply .0050 times your new loan amount to come up with what the fee would be. Also, if you did use the loan to purchase the house and it was a home equity line that was refinanced or utilized after the purchase of the home, it may still be considered a “cash out” refinance. The lenders will not charge the fee if your first mortgage remains under 70% of the new appraised value of the home.
You will only be required to pay PMI if your loan amount exceeds 80% of the appraised value of the home. If this is the case because your house has not appreciated enough to avoid it or your taking cash out that would put you over this threshold. More
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