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How can I refinance my 2nd mortgage ( Home equity loan ) and get rid of that horrible fixed 8% rate?

My first mortgage is at 4.5% fixed and they will not take on that 2nd mort due to the value that decreased over the years.  I am in fin'l hardship, but never had a single late payment on any of these loans over all these years.  Got my first mortgage in 2004, took out the 2nd one in 2006.  One person at the bank said I should default in order for my bank to work with me.  Just unbelievable!  Wonder, if any bank would give me a personal loan to wipe out that second mortgage.  Does anyone have some great advise for me??    Lisa G
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November 12 2011 - El Dorado Hills
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Lisa, Great question. Believe it or not, the are many in the same position as you are in now. A sign of the times. Fortunately, there may be some good options for you. First, pose this question to a lender. They should be able to provide a thorough explanation regarding your current financial situation. Second, remember to get a second even a third opinion from differing lenders. Let me know if you need recommendations for local lenders. Take care
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November 12 2011
Of course you'll also lose any tax benefit from your second mortgage

Unless the second mortgage, which you took out after having bought the home,  was taken out for qualified home improvements or for the purchase of another property you don't have any tax benefits with it.
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November 12 2011
Profile picture for Dan Tabit

Bird,
Second mortgages are always at a higher rate because they have much greater risk. With all the foreclosures and short sales in the market today, second lenders are getting little or nothing out of any settlement. They offset the risk by increasing the rate.
Telling you to default is dangerous advice. Only consider something like that if you have discussed it with your attorney and have review the consequences that come with that.
Since you indicate you are having a financial hardship, you may be able to do a loan modification with one or both lenders directly. Contact them through the customer service numbers on your statements and ask what options they can make available to you.

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November 12 2011
Lisa,

8% on a second mortgage is not all that terrible. Don't feel too bad about it
 
I wish I had a better answer for you but I don't. The only way I can think of to get a non-secured loan that can pay it off is to go to your bank or credit union. You might be able to get a lower rate (although not by much) with simple interest payments that could help out your current financial situation.

Of course you'll also lose any tax benefit from your second mortgage and there are other things to consider. But if short term cash-flow is the most important thing it's worth looking at...

Sincerely,
Greg
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November 12 2011
 
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