Can You Refinance Your Second Home?
- Before seeking to refinance a second home, homeowners should check their credit report and take steps to bolster their credit scores. Request a copy of your credit report and examine the report for errors. If the report contains errors, report the errors to the credit reporting agency and have the information corrected. Homeowners should make certain to pay all bills on time, avoid running up new debt or opening new credit accounts before and during the refinance process to improve and maintain their credit score.
Choosing a Lender
- Look for lenders that are offering the best loan terms for a home refinance. But with a second home, it may be difficult to locate lenders willing to write the loan at any terms. Homeowners who are having difficulty arranging financing should talk to financial institutions where they currently do business and lenders located near the second home. These lenders may be more willing to finance the second home. Homeowners who have the ability to pay down the existing mortgage may also increase the odds of successfully refinancing.
- While homeowners who are struggling to afford their primary residence are most often the recipients of mortgage modifications, lenders may be willing to modify a mortgage for a second home. Although a mortgage modification isn't a certainty, homeowners have nothing to lose from contacting the lender and making the request. Be ready to provide reasons why the modification is needed (loss of employment, medical expenses, etc.). If you can prove financial need, lenders will be more willing to assist you to avoid foreclosing on the home.
- If you are unable to refinance or modify your loan for a second home, there are a few options to consider depending on the specific circumstances. One option is to pay down debt, increase income levels and work to improve your credit score and then try to refinance in the future. Another option is to convert the home into an income-producing property by renting it. Once the property begins producing income, lenders may be more likely to refinance the loan. Of course, if you simply cannot afford the payment, selling the home is another option to consider.