Your Mortgage : Combining Debts Can Add Up to Savings : Refinance: Falling rates open up an opportunity to roll equity loan and mortgage payments into one money-saving total.

Are you a homeowner saddled each month with a heavy first mortgage payment and a home equity loan payment?

Then this could be the moment to combine your debt into one shiny new first mortgage. The maneuver is called a “debt consolidation refinance” and current mortgage rates make it an attractive possibility.

Of course you have to crunch the numbers relevant to you. But the potential is there to save a lot of money.

“If you roll all your debt into one mortgage, you should come out ahead,” says Fritz Elmendorf, a vice president of the Consumer Bankers Assn., which represents 700 U.S. lending institutions.

Sidney Lenz, executive vice president at Countrywide Funding Corp. in Pasadena, says relatively few homeowners realize the potential of debt consolidation refinance.

“Many people are very surprised they can combine their first and second mortgages, take some cash out of the property and still wind up with a lower monthly payment,” Lenz says.

What’s causing the new surge in mortgage refinancing is that first mortgage rates have fallen to their lowest point in four years. There are now 30-year fixed-rate mortgages available at 9% or less.

“Across the country, homeowners are beginning to flood lenders with refinance applications. Rates this low offer the best refinancing opportunity in years,” says Keith Gumbinger of HSH Associates, which publishes mortgage information for a number of U.S. markets.

But watch out for the pitfalls of refinancing your mortgage in 1991.

Keep in mind that--given the problems plaguing so many U.S. financial institutions--mortgage standards are more tightly enforced than they were during the last refinancing surge of 1986 and 1987.

Because of more intense scrutiny from federal regulators, lenders are more likely to go by the book when it comes to loan approval. That means, for instance, that if your credit report is blotchy, you could have problems refinancing.

“It may well turn out that by today’s standards, you couldn’t get the loans you already have,” says Paul Havemann, an HSH Associates vice president.

Be aware, too, that your home’s value may be judged very conservatively this time around. This is due both to the fact that property values have slumped in some communities and that appraisers are being more cautious in their estimates.

“The wild card in refinancing now is how much your house will appraise for,” Havemann says.

To be sure, refinancing will not come cheap. Most people can expect to spend between $1,500 and $5,000 to get a new home loan. Still, if doing a little math convinces you that it is worth it to refinance your first mortgage, you are usually well advised to roll your home equity or second mortgage debt into the deal, too, mortgage experts say.

The wide disparity between interest rates on first mortgages and those on home-equity lines makes combining both debts into a single new mortgage a good idea in many cases. Most home-equity lines are adjustable-rate loans that float with the market. Even so, rates on these loans tend to float 1 1/2 to two percentage points above first mortgage loans.

Certainly, the rates on fixed-rate home-equity lines and traditional second mortgages have remained high relative to fixed-rate first mortgage loans. You can still expect to pay an interest rate of 11% to 13% on such loans. The reality is that these rates have not moderated in recent months the way first mortgage rates have.

“Basically, they’re just high by nature and are probably higher than they need to be,” Havemann says.

If you decide to combine two mortgages into one, here’s how to proceed:

After locating the right lender, apply for a first mortgage that covers the outstanding balance on both loans. Once the new mortgage has closed, the lender will use the proceeds to pay off your old first mortgage as well as your second mortgage or home-equity loan. Then you make a combined payment each month to your new lender.

If you are interested in first mortgage refinance for any reason, mortgage experts say that you can forget the “two-percentage point rule.”

Conventional wisdom long held that you should not refinance your mortgage unless the new rate is at least two percentage points lower than the old one. But, as Gumbinger says, the rule fails to take into account a couple of important factors: what it would cost you to refinance and how long you intend to stay in the home.

“If you’re going to be there 10 years, as little as a half percentage point savings can make it worth your while to refinance. But if you only expect to stay two or three years, a two percentage point saving may not be enough,” Gumbinger says.

As an alternative to the old rule, Havemann offers this basic approach to deciding whether refinancing your first mortgage would be worth it to you:

“Take the savings you could achieve from the lower rate on your monthly payment (or payments) and divide the figure into the closing costs you’ll have for a refinance. The result is the number of months it will take you to break even. If you don’t think you’ll have the loan at least that long, then it doesn’t pay to refinance.”

Given the resurgence in mortgage refinancing, HSH recently developed a kit with work sheets that help a homeowner decide whether it’s in his interest to refinance.

The kit is available from HSH for $3. You can obtain one by writing HSH Associates, Dept. Refi., 1200 Route 23, Butler, N.J. 07405.

AVERAGE RATES FOR RESIDENTIAL MORTGAGES Average rates for residential mortgages as of March 1, 1991.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 9.20% 9.52% 9.37% 7.43% 7.75% California 9.45 9.74 9.61 7.87 7.85 Connecticut 9.18 9.48 9.36 7.31 7.56 Wash. D.C. 9.03 9.40 9.24 7.00 7.28 Florida 9.14 9.54 9.35 7.47 7.77 Mass. 9.26 9.57 9.42 7.39 7.83 New Jersey 9.22 9.51 9.38 7.39 7.84 N.Y. Metro 9.30 9.59 9.46 7.48 7.85 New York 9.43 9.72 9.59 7.62 7.97 N.Y. Co-ops 9.64 9.94 9.86 7.82 8.18 Pa. 8.95 9.30 9.13 7.23 7.38 Texas 9.00 9.29 9.15 7.51 7.62

SOURCE: HSH Associates, Butler, N.J.