How To Refinance a Second Mortgage
If you want to adjust your monthly payments, lower your interest rate or simplify your mortgage debt, it may be worth it to refinance your second mortgage. You’ll first need to decide whether to refinance the second mortgage on its own or roll it into a cash-out refinance that also replaces your primary mortgage. Anyone sitting on a low mortgage rate from 2020 or 2021, for instance, should probably protect their rate, and a cash-out refinance means giving it up.
Learn about how refinancing a second mortgage works, as well as the pros, cons and alternatives to consider before starting the process.
- You can choose to refinance your second mortgage directly, or to fold it and your primary mortgage into a single loan using a cash-out refinance.
- Second mortgage refinance rates are typically higher than refi rates for a first mortgage.
- Your existing lender may be able to offer you better terms on a refinance loan than a new-to-you lender.
Can you refinance a second mortgage?
Yes, you can refinance a second mortgage, such as a home equity loan or home equity line of credit (HELOC). There are two basic options here:
- Refinance the first and second mortgages into a single loan using a cash-out refinance
- Refinance the second mortgage on its own
Here’s how these two options work:
| Second mortgage refinance | Cash-out refinance | |
|---|---|---|
| Your first mortgage rate | Stays untouched | Replaced with a new rate |
| Interest rate on the new debt | Higher than a first mortgage | Lower than a second mortgage |
| Closing costs | Typically lower than refinancing a first mortgage | Typically higher than refinancing a second mortgage (approximately 2% to 5% of new loan amount) |
| Monthly payments | Two payments | One consolidated payment |
| Loan term | Often shorter than a first mortgage | Resets your first mortgage, beginning a new term |
Which second mortgage refinance option is right for me?
The best choice for you — that is, choosing whether to refinance a second mortgage separately or combine it with your first mortgage — depends on interest rates, your equity and your financial goals.
Refinancing your second mortgage on its own is often the better option if:
- You have a low interest rate on your first mortgage that you don’t want to give up.
- You can qualify for a lower rate or better terms on your second mortgage.
- You want to lower your monthly payment without replacing your primary mortgage.
- You don’t need to borrow additional money from your home’s equity.
- The savings from refinancing your second mortgage outweigh the closing costs.
Refinancing your second mortgage using a cash-out refinance is often the better option if:
- Your current first mortgage has a higher interest rate than today’s refinance rates.
- You want to replace two mortgage payments with a single monthly payment.
- You need to borrow additional cash for home improvements, debt consolidation or another major expense.
- You have enough home equity to qualify for a cash-out refinance.
- The long-term savings or financial benefits outweigh the cost of replacing your current first mortgage and paying closing costs.
Should you refinance your second mortgage?
You should consider refinancing if …
-
Interest rates have dropped
You need lower monthly payments
You have improved your credit score
You want predictable payments and currently have a HELOC
You want to combine your first and second mortgages into one loan
To refinance a high-rate second mortgage you took out as part of a piggyback loan]A piggyback loan is a second mortgage taken out during the homebuying process, allowing you to essentially split the home purchase between two loans. In doing so, you reach the threshold of 20% equity needed to avoid paying private mortgage insurance (PMI) on the primary mortgage.
You may want to wait if …
- Your first mortgage has a much lower rate
- Your closing costs outweigh the savings
- You plan to sell your home soon
- You don’t have enough home equity
Requirements to refinance a second mortgage
HELOC and home equity loan refinance requirements
| Credit score minimum | 620 to 680 |
|---|---|
| Debt-to-income (DTI) ratio maximum | 43% to 50% |
| Loan-to-value (LTV) ratio maximum | 80% to 85% |
| Home equity minimum | 15% |
Cash-out refinance requirements
| Credit score minimum | 500 to 700 |
|---|---|
| DTI ratio maximum | 41% to 45% |
| LTV ratio maximum | 80% to 100% |
| Home equity minimum | 0% to 20% |
For more details on cash-out refinance programs and their requirements, visit LendingTree’s cash-out refinance requirements guide.
6 steps to refinance a second mortgage
1. Decide if refinancing is worth it for you
You should expect to pay 2% to 5% of the total mortgage in refinance closing costs. If you don’t have the cash readily available, or if the savings you get from a lower interest rate won’t be equal to (or greater than) the fee, it may not be the right time.
2. See if you’ll qualify
Request your free credit reports from each of the three major bureaus and review them for inaccuracies. If you find any errors, be sure to dispute them immediately.
You should also take the time to calculate your DTI and LTV ratios in order to determine which lenders are likely going to be willing to refinance your second mortgage.
Don’t know your credit score? Check your credit score for free on the LendingTree app today.
3. Get your paperwork in order
Your lender will look at your credit score and DTI ratio to determine what type of terms to offer for your refinance. If you have a second mortgage through a separate lender, you’ll need documentation from both companies.
You should also expect to provide proof of income (in the form of W-2s, pay stubs or previous tax returns and proof of assets. Gathering these documents early can save you time and energy later.
4. Compare lenders
The first lender you should speak with is the one that currently holds your second mortgage. See if it’s willing to refinance the loan and what the requirements are. In some cases, you may snag the best refi terms with your existing lender since you’re already a customer; it knows your loan situation and usually doesn’t want to lose the account entirely.
Simultaneously, you may also want to rate-shop. Checking out interest rates and researching different lenders enables you to find the best terms. After shopping around with at least three to five other lenders, you can make an informed decision about your available loan options and where you’ll save the most money.
LendingTree offers a free, safe, and secure way to quickly compare rate quotes from a network of vetted home refinance lenders.
According to 2026 LendingTree data, borrowers that use LendingTree to compare offers can save $62,572 over the life of a 30-year loan.
When banks compete, you win.
Get started by filling out our form below to see competitive home equity rate offers today.
5. Apply for your refinance
Once you’ve chosen your lender, it’s time to submit an application. Be prepared for a phone call (or two) and requests for additional information.
6. Close the loan
Your lender will review your refinance application and finalize any paperwork; however, know that this process isn’t always quick. In the meantime, it’s important to continue making payments on your existing second mortgage during the refinance process.
Any adjusted terms will take effect with your new loan once it is funded. After your lender approves your refinance, you’ll be sent a statement detailing the amount owed, due date, interest rate and more.
Pros and cons of refinancing a second mortgage
Pros
- You can lower your interest rate. By refinancing any home loan (first or second), you have the ability to lower your loan’s interest rate and save money in the long run. This is possible if market rates have shifted, your credit score has improved since you borrowed the loan or you’ve built more home equity.
- You can simplify both mortgage loans. You can use a second mortgage loan to combine your primary and secondary mortgage loans into one account. Doing so allows you to have only one interest rate, one monthly payment amount and one balance to manage.
- You can adjust your monthly payment. If you want to adjust your loan’s monthly payment amount, a refinance can help you do so. Refinancing may drop your interest rate, extend your loan term or both — each of which can lower your monthly payment.
- You can lock in a fixed interest rate. If you have a variable interest rate, refinancing may allow you to lock in a fixed rate instead. This has the potential to save you thousands, especially if market shifts cause mortgage rates to spike.
Wondering where mortgage rates are headed? Read our mortgage interest rates forecast.
Cons
- You’ll pay fees for your refinance. Refinancing isn’t free, and borrowers can expect to pay certain refinance closing costs and fees. If your refi won’t save you more than you’ll pay in fees, reconsider whether it’s the right move.
- You can impact your credit score. Closing one mortgage account and opening another can affect your credit score, even if it’s temporary. Hard inquiries, new accounts and closed tradelines all affect your score calculation.
- You may not be able to sell your home. In many cases, you can’t sell your home while you still have an active second mortgage balance. Instead, you may need to pay off your remaining balance prior to putting your property up for sale.
Alternatives to refinancing a second mortgage
- Loan modification. A loan modification is when your lender agrees to permanently change your loan terms to make your payments more affordable, usually because you’ve demonstrated financial hardship.
- Mortgage recast. If you have a lump sum you can put toward paying down your mortgage balance, the lender will then recalculate your mortgage payments based on a smaller loan balance. This gives you some relief by lowering your payments.
- Personal loan (for smaller balances). If you can’t qualify for a new second mortgage or a cash-out refinance, a personal loan may simplify repayment without the need to use your home as collateral. However, rates are often much higher and the maximum loan amounts are smaller than with second-mortgage loans.
Frequently asked questions
Any time you add or refinance debt, you have the potential to impact your credit score. By refinancing a second mortgage, you also drop your average age of accounts and add a hard inquiry to your credit report — both of which can impact your score.
In most cases, you can’t sell your home when you have a second mortgage on the property. Borrowers in this situation often refinance their second mortgage with their first mortgage to consolidate the loans into one.
Each lender will have its own borrowing limits and home equity requirements. Generally speaking, though, eligible borrowers can expect to take out a maximum of 85% of their home’s value, minus their outstanding mortgage balance.
Borrowers can put their home equity to work through a second mortgage by using it for home renovations, business startup fees, medical expenses, debt payoff or even an investment property purchase.