Refinancing advice

Guest 0.10 Dollars($)

Hi all,

Currently, I have a fixed rate 5.75% 1st mortgage of about $152k. I also have an equity line opened of about $147k that is prime less .75% (currently 4.25%).

I have the opportunity to consolidate and refinance with a $320k 5.875% fixed 30 year mortgage. Out of pocket closing costs would be about $9k which they will roll into the mortgage. So basically I will have taken a $320k mortagage and get cash out of about $12k for whatever.

My question is simply should I do this? The only reason I'm considering it is because loans that are not fixed (i.e. My equity line) kind of scare me a little. But I'm really not certain that this course of action makes much financial sense.

Any advice is most welcomed.

Thanks in advance,
Chris

Niicss · Joined: 03 Oct 2005 Posts: 1047 156.15 Dollars($)

Welcome griswalch.

Before going for refinance check out certain points....

1. With the 12k cash out are you paying off any high interest debt or any medical bills?

2. After refinancing can you make your monthly mortgage payments lower?

3. After the 30 year of loan period are you paying less than your present mortgages?

If the answers are yes then go for refinancing.

Guest 0.10 Dollars($)

Thanks for the welcome and thanks for the reply.

I have about $4k in credit cards and a remaining balance on a student loan of about $7k. I would pay these off. That's about the extent of other debt.

After the refinance, I suppose my payments would not really change much in the short term but that probably wouldn't be the case in the long term. Seeing as how I'm only required to pay interest on the equity line which is currently only at 4.25%, as the balance goes down, so does the minimum payment.

I don't know, maybe I'm just being paranoid with a loan whose interest rate fluctuates with whatever the prevailing prime rate is. Looking back at the prime rate history and the current state of the economy, it wouldn't seem that I would be in any danger of a huge jump in interest rates anytime soon. I'm just not much of a taking risks kind man. lol

Niicss · Joined: 03 Oct 2005 Posts: 1047 156.15 Dollars($)

Welcome griswalch.

So you should then go for refinancing as you can pay off the credit card debts & student loan and at the same time you can combine both of the loans into FRM.

JuanHdez · Posted: Mon Jun 02, 2008 7:53 pm Post subject:

Hello Gris,

You have some much valid concerns. My experience with equity lines is that the minimum payment is calculated by taking a little over 1% of the loan balance regardless of the interest rate. I believe that the payment for a new 30yr fixed would be lower than than which you already have. I would definately recomment my clients to do this loan. Your payment would be lower and you can add the difference in payment back to principle which would lower the term of the loan.

Best O Luck.

J

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