mobgirl asked:
Here is my situation: We would like to put around $20,000 into our house. Should I refinance at a much lower interest rate for an extra 20 grand? Or should I keep our current mortgage as is and take out a home equity loan for $20,000. Currently we owe 70,000 on our home, have no other significant debt and our current interest rate is 7.150% with 25 years left to pay it. We have the option to refinance at 90,000 at an interest rate of 5.89% for a term of 20 years. Which makes the best sense?
Danny
Here is my situation: We would like to put around $20,000 into our house. Should I refinance at a much lower interest rate for an extra 20 grand? Or should I keep our current mortgage as is and take out a home equity loan for $20,000. Currently we owe 70,000 on our home, have no other significant debt and our current interest rate is 7.150% with 25 years left to pay it. We have the option to refinance at 90,000 at an interest rate of 5.89% for a term of 20 years. Which makes the best sense?
Danny
Edith
Sounds like you’re in pretty good shape. I’d refinance at a lower rate, and make sure there is no pre-payment penalty. If you can handle the payments, refinance for 15 years. You’ll save thousands in interest.
Nellie
It would of course be best to refinance at the lower rate and have one payment. However regardless of which one you choose, be SURE you can afford the monthly payment(s), even in a worst-case-scenerio like one person losing a job. Otherwise you could lose your home.
Leslie
That does make the best sense all around, i dought you’ll find a home Eq. that low, you can still write off your interest for the extra 20 g’s and your cutting 5 years off your mortgage. Sounds like a no brainer as long as your can afford the payment. The reduction in interest should offset quite abit though, do the refi. in my opinion.
Marcia
That’s a no brainer. Either way you will have a debt of $90,000. A home equity loan cannot be had anywhere near 5.89% and your current mortgage is more than that now. One loan of 90k at 5.89% or one for 70k at 7.155 and one for 20k at around the same … The choice is obvious. Also, as of today, January 8, 2008 conforming rates are as low as 5.125% for a 20 year term. Shop around and act fast to lock in a super rate, but definately do a full refi for 90k.
Cheryl
If you can refinance for a lower fixed rate and pull some equity out, that makes more sense than a second mortgage. Seconds come with higher rates.
Jo
refinance. the home equity line will be a lot higher interest than your re-finance and you will have 2 payments instead of one. Just don’t make the mistake of pulling out the maximum amount of equity. Also, make sure you put the money back into the house and do not use it for debt. If your situation changes in a year or two and you need to sell you don’t want to be upside down in the house. You need to make sure that the improvements you are making to your house will increase the value enough to pay the loan off if you have to sell.
Gina
Most HELOC’s will come with either a higher fixed rate or a higher adjustable rate. Your best bet would be to take the cash now from the sound of things.
You could take the 20k and drop your payment by nearly 1.5% – which would probably leave you with nearly the same payment.
Figure on paying about the same (or a little more) as you are paying now. You should be fine.