Posted on: 20th Dec, 2008 04:23 pm
i have a mortgage of 345,000 at a interest rate of 6.25% . The value of the house now is 550,000. i have a 20,000 car loan with 5.5% and 10,000 credit car with 10.9%. My question is " Is it a good idea refinancing my mortgage at a 4.75 %(using the Equity loan of my house to refinance ) and paying of my debts into one sum
Hi joseph!
Welcome to forums!
It's a good idea to refinance the loan at a lower interest rate. But you should remember that a refinancing will also include paying the closing costs and other related costs. So before going forward and refinancing the loan, think about it.
Feel free to ask if you have further queries.
Sussane
Welcome to forums!
It's a good idea to refinance the loan at a lower interest rate. But you should remember that a refinancing will also include paying the closing costs and other related costs. So before going forward and refinancing the loan, think about it.
Feel free to ask if you have further queries.
Sussane
do you really need that car payment and CC payment freed up? If you can afford to pay them now, you will pay less in total if you only re-fi the mortgage and keep your other debits seperate.
Think about it, how will you feel 20 years from now when you still have 10 years to go on paying off that car you got rid of a long time prior. When you roll your auto loan into your 30 year mortgage, you are effectivly paying for that car for 30 years, regardelss of whether you still have/use it.
Same with credit cards, I don't know what you have used them for to date, but are you OK with paying on them for 30 years?
That being said, I did exalty as you have asked, I rolled the last year ($2,500) of a 6 year car loan and about $8,000 in CC debits into a 2nd mortgage (20 year). It freed up $1100 in monthly payments, and raised our credit score about 80 points. We used that new monthy fredom to finagle our way into that 2nd mortgage, of which we used most to remodel our house. We ended up putting $15,000 into the house over 1-1/2 years or remodeling, and reappraised a $87,000 gain. To us, rolling those debits into the 2nd mortgage not only freed us of a lot of monthly burdon, but it also allowed us to execute some much needed repairs and greatly increased our equity. For us it was a financialy smart move.
Be sure you do this for the right reasons. If it's just to save a few $$$ monthly so you can have more "fun", that is not a good -financial- motivation.
If it will change your financial situation greatly, or opens a lot of new doors to improving your net worth, then it can be a good idea.
Just do the math on a 20,000 loan on that car over 30 years at 4.75% vs 5 years at 5.5%, you'll be amazed at how much you'll have paid for that car acter 30 years ;) : it's $37,558.61 vs $22,921.39 , that's $104 per month vs. $382, is that $278 month savings worth $14,637 in added interest?
It will be almost the same difference with the credit cards.
If you can afford to pay what you have now but want the freedom of a smaller payment, you can pull a 2nd mortgage for the car/CC's and just pay extera on it. That way you have the flexibility of smaller payments and a good rate, but you can pay it off quickly if you continue to make yoru current payments( (thus lessening that terrible interest burdon).
the closing costs can take years to recover even with a big inteest rate change. There are many online calculators to determine the break even point (I use one on bankrate.com). If you are in this house for the long term, then yes refi if you can. Otherwise, you had better use those calculators to determine the break even point.
Think about it, how will you feel 20 years from now when you still have 10 years to go on paying off that car you got rid of a long time prior. When you roll your auto loan into your 30 year mortgage, you are effectivly paying for that car for 30 years, regardelss of whether you still have/use it.
Same with credit cards, I don't know what you have used them for to date, but are you OK with paying on them for 30 years?
That being said, I did exalty as you have asked, I rolled the last year ($2,500) of a 6 year car loan and about $8,000 in CC debits into a 2nd mortgage (20 year). It freed up $1100 in monthly payments, and raised our credit score about 80 points. We used that new monthy fredom to finagle our way into that 2nd mortgage, of which we used most to remodel our house. We ended up putting $15,000 into the house over 1-1/2 years or remodeling, and reappraised a $87,000 gain. To us, rolling those debits into the 2nd mortgage not only freed us of a lot of monthly burdon, but it also allowed us to execute some much needed repairs and greatly increased our equity. For us it was a financialy smart move.
Be sure you do this for the right reasons. If it's just to save a few $$$ monthly so you can have more "fun", that is not a good -financial- motivation.
If it will change your financial situation greatly, or opens a lot of new doors to improving your net worth, then it can be a good idea.
Just do the math on a 20,000 loan on that car over 30 years at 4.75% vs 5 years at 5.5%, you'll be amazed at how much you'll have paid for that car acter 30 years ;) : it's $37,558.61 vs $22,921.39 , that's $104 per month vs. $382, is that $278 month savings worth $14,637 in added interest?
It will be almost the same difference with the credit cards.
If you can afford to pay what you have now but want the freedom of a smaller payment, you can pull a 2nd mortgage for the car/CC's and just pay extera on it. That way you have the flexibility of smaller payments and a good rate, but you can pay it off quickly if you continue to make yoru current payments( (thus lessening that terrible interest burdon).
the closing costs can take years to recover even with a big inteest rate change. There are many online calculators to determine the break even point (I use one on bankrate.com). If you are in this house for the long term, then yes refi if you can. Otherwise, you had better use those calculators to determine the break even point.