Like really tight. My wife and I were both working full time, not buying crazy stuff, but somehow we were always broke at the end of the month. Couldn’t figure out where all our money was going.
No wonder we were always struggling.
Payment was about $1,255 a month. Not great but we could handle it.
That added another $240 per month.
The Conversation That Changed Everything
It was affecting our marriage honestly. We’d fight about stupid stuff but really we were just stressed about finances.
One night my wife just breaks down crying.
My wife said she’d been reading about refinancing online. Said you can refinance 1st and 2nd mortgage together into one loan. Maybe get a lower rate, definitely get a lower payment. But she was so upset that I promised I’d make some calls.
Making the Calls With Low Expectations
The next day I called our bank. Explained the situation – two mortgages, struggling with payments, wanted to see what options we had. The guy I talked to – think his name was Mark – was actually really understanding. Said lots of people are in similar situations.
He asked me some questions. How much we owed, what the rates were, what the house was worth. I didn’t know all the answers off the top of my head so I had to pull up our mortgage statements and look stuff up.
Still owed about $198,000 on the first mortgage and $26,500 on the second mortgage. Total of $224,500. The house was probably worth around $310,000 based on what I’d seen similar houses selling for in our neighborhood.
Mark ran some numbers. Said they could offer us 4.5% on a 30-year mortgage for the full $224,500. Monthly payment would be around $1,138 for principal and interest.
Hold on. I was currently paying $1,495 for just principal and interest on both mortgages. This would be $1,138. That’s $357 less per month.
Said you can refinance 1st and 2nd mortgage together into one loan.
I asked him to double check. He did. Yeah, $1,138.
That would be a huge difference for us. $357 a month is over $4,000 a year. That’s groceries, car repairs, emergency fund money. That could actually change our situation.
But I remembered reading online to get multiple quotes. So I told Mark I needed to think about it and hung up to call other lenders.
Comparing Options
Over the next two days, four more lenders.
4.25% with closing costs of $3,600. Monthly payment would be $1,105.
I called my wife at work to tell her. She started crying again but this time from relief. We could actually afford to breathe if we could save that much every month.
The Closing Cost Problem
The only issue was those closing costs. $3,600 is a lot of money. Money we definitely didn’t have just sitting around in our checking account.
It’s been three months now since we decided to refinance our 1st and 2nd mortgage together. Still way better than $1,495. We’d save $372 per month even with the closing costs rolled in. And we wouldn’t need to come up with $3,600 cash.
Or, Sarah said, we could do a no-closing-cost refinance. They’d charge us 4.625% instead of 4.25% and cover all the closing costs themselves. Monthly payment would be around $1,170.
We ran the numbers. That higher interest rate would cost us about $560 more per year compared to the 4.25% rate. It would take us about six years to make up for the $3,600 in closing costs we’d avoided. And then we’d be paying more forever after that.
Decided to roll the closing costs into the loan. Yeah we’d pay interest on that $3,600, but it was the best option for our situation.
The Application Which Required Way More Paperwork Than Expected
Sarah sent over the application and list of documents they needed.
It took my wife and me a whole weekend to get everything together. We’re not organized people. I had to dig through emails, download stuff from various websites, and scan documents. It was tedious.
Said you can refinance 1st and 2nd mortgage together into one loan.
Then they came back asking for more. I needed a letter from my employer confirming I still worked there and what my salary was. Needed updated bank statements because by the time they reviewed our application, the ones we’d sent were too old. Needed an explanation for a $5,000 deposit in our checking tax refund, but apparently that needed documentation.
Closing Day
We closed on a Friday afternoon. I had to go to a title company office downtown. My wife took off work early, I left work at 2pm.
Got there and the closing agent had this massive stack of papers for us to sign. Had to be 150 pages at least. We sat there for over an hour and a half just signing and initialing.
My hand was cramping by the end. My wife made jokes about getting carpal tunnel from refinancing.
Said you can refinance 1st and 2nd mortgage together into one loan.
One thing that confused me – we had to bring a cashier’s check for $475 for some recording fees that couldn’t be rolled into the loan.
The First Month After
First payment on the new loan wasn’t due for about 45 days because of when we closed. So we had this weird month and a half where we didn’t have any mortgage payments. Had an extra $1,495 in our checking account that normally would’ve gone to the old mortgages.
It was so tempting to spend it on something fun. Go out to dinner, buy some stuff we’d been wanting. But my wife was smart and said we should save it for emergencies. Good thing too because our washing machine broke two weeks later and we needed to replace it. Having that extra money saved us from putting it on a credit card.
When that first payment came due – $1,123 instead of $1,495 – it felt surreal. Like surely we were missing something, surely there was a catch. But nope, that was really the payment.
Set it up on autopay so we wouldn’t forget or accidentally miss it.
Three Months Later – How It’s Actually Going
It’s been three months now since we decided to refinance our 1st and 2nd mortgage together. And honestly, it’s changed our lives.
That extra $372 every month has made such a difference. We’ve been able to start saving again. We have about $1,100 in our emergency fund now which isn’t a ton but it’s infinitely more than the $0 we had before.
What I Learned From This Whole Thing
Biggest lesson – don’t wait until you’re desperate to look into refinancing. We struggled for almost three years when we could’ve been saving money the whole time. If I’d just made some phone calls two years ago, we’d have saved over $8,000 by now.
Second lesson – shop around. The difference between my best and worst quote was substantial. Would’ve cost me hundreds of dollars a year if I’d just gone with the first offer.
Third lesson – even if you don’t have cash for closing costs, there are options. We rolled ours into the loan and it still made sense financially. Don’t let closing costs stop you from at least looking into refinancing.
My Advice If You’re In a Similar Situation
If you’ve got two mortgages and you’re struggling with the payments, please look into refinancing both together. Don’t wait until you’re desperate like we were. Just make a few phone calls and see what rates you can get.
The process to refinance 1st and 2nd mortgage into one loan isn’t as complicated as it seems. Yeah there’s paperwork and it takes some time, but it’s manageable. And the potential savings are real.
Bottom Line
We had two mortgages that were killing our budget. We were stressed, broke, fighting about money constantly. Finally looked into refinancing both into one loan. Now we’re saving almost $400 a month and our financial situation has completely turned around.
Should we have done it sooner? Absolutely. But at least we did it eventually.
If you’re struggling with two mortgage payments, the option to refinance 1st and 2nd mortgage together might be exactly what you need. Don’t assume you can’t afford it or that it won’t help. At least make some calls and find out. Could change your life like it changed ours.
