Second mortgage or second lien
The traditional term for a home loan that’s a subordinate lien and not a first mortgage, such as a home equity loan or line of credit.
With a fixed-rate mortgage refinance, your interest rate—and your monthly payment of principal and interest—will stay the same for the entire term of the home loan. A fixed-rate mortgage tends to be the most popular because it protects homeowners from payment surprises and is very straightforward.
Whether you’re interested in possibly lowering your monthly mortgage payment or switching to the predictability of a fixed-rate loan, our expert mortgage loan officers are here to help.
Fixed-rate mortgage refinance loans are a good choice if you:
The 30-year fixed-rate refinance mortgage is one of the most popular loans. Many people like the fixed interest rate, and payments are kept more affordable because they are extended over a long period of time. But since the term of the loan is long, you’ll pay more interest over the life of the loan than you would on a shorter-term mortgage, and you build equity more slowly.
A 20-year fixed-rate refinance mortgage helps you pay off your home faster and build equity quicker than a longer-term fixed-rate mortgage. A 20-year fixed generally has a lower interest rate than longer-term loans but higher monthly payments.
You generally pay a lower interest rate with a 15-year loan than you would for longer-term fixed-rate loans. You can save considerable money on total interest paid over the life of a 15-year loan versus longer-term loans, and you’ll build equity more quickly. However, your monthly payments will be higher for a 15-year than they would be on a longer-term mortgage.
Note: Bank of America offers the interest-only payment option on jumbo loans only.
Fixed-rate interest-only loans have a 30-year term and an initial time frame, usually 10 years, during which you can choose to make interest-only payments or both principal and interest payments. This means the initial payments are comparatively low, allowing you to use the balance of your cash flow for other immediate needs. At the end of the interest-only period, you will be required to pay both interest and principal so the outstanding balance will be paid in full over the remaining 20-year term of the loan.
While you’re paying only interest, your payments are not building potential home equity. By the end of the interest-only period you will still owe the original amount you borrowed, which may make it more difficult to refinance your mortgage or to make money from selling your home. If you paid only interest during the initial time frame, once the initial time frame expires your payments will be significantly higher and can result in “payment shock.” Be sure you fully understand the risks involved before committing to an interest-only loan and making interest-only monthly payments. Since this loan begins with an interest-only period, you will pay more interest over the life of the loan compared with a traditional 30-year mortgage.
Interest-only loans tend to appeal to people whose income fluctuates (those who are self-employed, on commission or on a bonus schedule) or who expect to own their home for a short period of time.
If your mortgage will be for an amount higher than Glossary Term: conforming thresholds, a jumbo mortgage may be an option. Jumbo loans are available for primary residences, second or vacation homes and investment properties, and are also available in a variety of terms. Jumbo home loans typically have a higher interest rate than smaller home loans due to different Glossary Term: underwriting and home equity requirements.
A combination loan pairs a conforming first mortgage with a home equity Glossary Term: second mortgage for up to 80% of the property’s value in a single application. Combination loans may help you avoid the higher rates of a jumbo first mortgage. Combination loans are made up of 3 parts:
These 3 parts can be combined in different ways. For example, a 70% first mortgage, 10% home equity second mortgage and 20% cash payment or existing home equity. Talk with a Bank of America mortgage loan officer for information about refinancing and combination loans.