I have a 15yr. fixed rate first mortgage at 5.5% that I’ve been paying on for nearly 3 yrs. In May 2004 I took out a 2nd mortgage (home equity loan, not HELOC) at 3.625% for some home improvements. This loan has a 5 yr. prepayment penalty ($900). I am interested in getting more cash out to finish the home improvements that the loan from last year didn’t cover & to do some debt consolidation on my credit cards, etc. Will I have to pay off the 2nd mortgage/home equity loan in order to pay off the first for a cash-out refi? Or can I get away w/ leaving this 2nd alone to avoid increasing the interest rate on this $$ & the prepayment penalty? FYI – PMI is not an issue because there’s plenty of equity in the home.
Thanks in advance for your input-