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HELOC refinance question

Hi Mentors, I am hoping for some guidance.

I have found that I am getting lost in the credit card "shell" game, moving around balances to keep them at teaser rates trying to avoid transfer fees when possible. My balances never seem to go away though. Coupled with that are rising rates affecting my adjustable rate HELOC. I refinanced about a year and a half ago and did an 80/20 Fixed and HELOC. My questions are:

1} Should I refinance my HELOC into a fixed rate 2nd mortgage to stop rates from rising?

2} Can I get that 2nd mortgage to include my credit card debt and car loan? (note I will be within 125% of my home's value)

3} If I am able to do #2 will all of my interest be tax deductible?

Please advise....Sincerely,

The Shell Game Guy :-)

jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:b60bf79533]1} Should I refinance my HELOC into a fixed rate 2nd mortgage to stop rates from rising? [/quote:b60bf79533]
Hi,
Changes in the market impact a HELOC very quickly. If the prime rate changes on April 30, the HELOC rate will change effective May 1. So, I think going for a fixed rate will be a good idea.

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome to MortgageFit Forums.

You need to analyze and decide on which way to go when you think of refinancing your HELOC.

[quote:fcbae1ce4f]Should I refinance my HELOC into a fixed rate 2nd mortgage to stop rates from rising?[/quote:fcbae1ce4f]Rates have gone up for most part of the last 12 months. Now what you need to check is the rate for your adjustable rate HELOC which probably can't be touched under the present market conditions.

So any refinance may increase your payments but at the same time if want to be protected in the long run then you must choose a fixed rate second. One more thing you must find out before you plan is that how long you are going to keep the house. It will be wise for you to go for a fixed rate if you plan to keep the house for a long time.

[quote:fcbae1ce4f]Can I get that 2nd mortgage to include my credit card debt and car loan? (note I will be within 125% of my home's value)[/quote:fcbae1ce4f]Are you looking for consolidating your debts? For your information a 125% home loan is a perfect way when you consider consolidating your bills. It allows you to pay off all your credit cards, consumer loans and other bills by combining them into one low monthly payment. So, for that you need to look for debt consolidation mortgages.

[quote:fcbae1ce4f]If I am able to do #2 will all of my interest be tax deductible?[/quote:fcbae1ce4f]Once you consolidate your debts into a home loan the interest becomes tax-deductible unlike a credit card interest.

Feel free to ask if you have more doubts.

God bless you.

For MortgageFit,
Samantha

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blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

[url=http://www.mortgagefit.com/second-mortgage.html]Second mortgage[/url] loans are most suitable for consolidating debts.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

thank you both for the feedback...

Samantha,
I was hoping the interest on a 125% loan was fully deductible but this site says the IRS treats the amount over the home's value differently depending on what the extra is used for {see link below}:

realestateabc.com/taxes/deductible2.htm

Is this true? If so, how do they verify what you spent the extra cash on? Not that I'd do this, but could I say it was for Home improvements and then use it for debt payoff?

Please advise...

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Samantha's picture
Samantha | Joined: September 16, 2005 11:59 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

Welcome again.

Yes it is true that the portion of the money, from the 125% loan-to value second mortgages, that exceeds the value of your home is not tax deductible.

Direct deduction of the expenses associated with home improvements from your taxes is not possible but your home's value will increase with these improvements.

You need to keep all the receipts from the home improvements so that you can prove what your home is worth and thus the potential taxable gain will reduce during the sale of your home.

Feel free to ask if you have more doubts.

Thanks,
Samantha

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blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Tax deduction related matters are complicated and changes with time. This site can be helpful for you to know more on tax related to your query.

It is nice to see your interest and concept in the mortgage field. Why don't you join the MortgageFit Community? You can sign up here to become a community member and participate in the forums.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Word of advice. You will pay much less interest with a HELOC vs and 2nd mortgage. The HELOC is calculated on a average daily balance, So by putting a little extra payment towards your HELOC your ammount owned will decrease every month. 2nd Mortgage payment will stay fixed for the life of the loan. Don't worry so much about the interest rate, but by how it is calculated. You will pay less interest in the long run. Don't listen to all the scare tactics. Use logic when making decisons NOT emotions. Regards, Swanson Real Estate Investments

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

We have a HELOC loan (no mortgage loan). Can we convert this into a another kind of loan, a mortgage perhaps, in order to get more than 50% of our home's value (we live in TX)? We plan on continuing to live in this house for a long time. Thank you!

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi

There are some convertible home equity line of credit loans which can be converted into a fixed rate loans after a certain period of time. But there are certain conditions to do that, which varies from lender to lender. You can go for a cash-out refinance if there is enough equity in the property. You can refinance to a fixed rate loan and use the cash-out money to repay the HELOC. You can also convert your HELOC into a fixed rate [url=http://www.mortgagefit.com/home-equity.html]home equity loan[/url]. Check with you HELOC lender to find if these options apply in your case.

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mickbali123's picture
mickbali123 | Joined: October 20, 2009 02:57 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi.
Would it be possible to re-finance? What is involved in re-financing? Any help would be much appreciated.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

refinancing opportunities are always available. it depends on your personal situation, so it's hard to say what kind of options would be available to you. in general, though, you can refinance a first and second mortgage into a new first mortgage, or you can refinance a home equity loan into a new home equtiy loan (second mortgage). sometimes, depending on the specifics, you can borrow additional money while paying off the existing loan.

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