Loans Answers

Mortgage refinancing questions

Question: We have decided to refinance our mortgage and take out $10,000 to pay >off our credit cards and do some repairs on our house. Our current >mortgage is at 8.5% and we owe 70,500 on a house worth about $135,000, >with 16.5 years left on our loan. I figured out that with a 5.25%, 15 >year mortgage mortgage, we should be able to bundle in our clsoing costs >and take out $10,000 equity and have the same monthly payment we have >now.

Answer: We recently refinanced. We went to the bank that held the mortgage. The result was a loan at a lower interest rate, for less time than remained on the old loan, and fees totaling $75.00 (that’s seventy-five dollars). Oh, and a lower payment.

In my case, the original loan had about 14 years left on it “officially”, but because we prepay principal by $100/month, I figure it actually had about 12.5 years left to run. The new loan was for 10 years.

In my opinion, points are almost always a bad deal. If you do nothing, you won’t have to pay points, of course. To make things comparable with your present situation, look at loans without points – that’s gives you something closer to the true cost of the loan. You could take that money and just use it to prepay principal on your present loan and depending on where you are in the loan, save several years of payments. Also if you do nothing, you won’t have any closing costs, and again you could dump that money against your present loan and shave still more time off the remaining term. What it boils down to is that you _could_ end up spending less money overall by keeping your present loan than if you do the refinance. You can’t tell unless you run the numbers

Or you could take that points and closing costs money and be halfway or better toward the $10,000 you want to cash out.

In my case, my “refinance” was a home equity loan instead of a conventional mortgage. Not really much different when it comes to rates and terms, but a huge difference in points, fees and closing costs – $75.00 instead of several thousand bucks. Technically, what I did was take out a home equity loan and use it to pay off the old mortgage. The bank also tossed in a credit card with the credit line tied to the house – in effect I can write my own tax-deductible home-equity loan by using this card. That’s been tucked away for the next time I have to buy a car and the dealer/manufacturer isn’t offering zero-percent financing.

Related Posts

• Who’s rented out a room in their house before?
• Advice needed on Rent Deposit usage
• Will this result in bad credit?
• Air Conditioning
• “Boiler Room” = stock market crash?
• Title query.
• Mortgage refinancing question
• Can one buy when a house is listed to be sold on the courthouse steps?
• paying off fixed mortgage – question
• Consolidating DEBT with a HOME EQUITY LOAN ?
• Personal loan question
• Should I get a credit card if my credit is bad?

Filed under: Home Equity Loan