Seeking answers

[Briansmom]

I have a mortgage payment $517/mth 6%, home equity payment $300/mth 5.9%, and cc debt approx $300/mth 18%. I looked into getting a 1.25% refinance consolidation loan to pay everything off. The only this is, is that I'm back at 30 yrs again, where as I only have 18 yrs left on my home. But I am also looking at the interest that I will be saving on everything as a whole. Is this a good thing to do, or should I keep everything seperate?

My husband wanted to be done with the mortgage in 10-15 yrs and doesn't want to go back into a 30 yr loan, but the payments are so low that this would give us the opportunity to save money and we can also double our payments later if we wanted. Should we not look at the term but look at the interest savings?

[Broken Arrow]

Re: Seeking answers

Longer mortgages are generally a bad idea because you'll end up paying much more in the long run.

[Briansmom]

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So you think even though the payment is lower and everything is paid off in one shot it's still doesn't work itself out as a better way to go?

[boefixepa]

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This option can be a plausable solution, but just as everything in life, it is a risk. It's a bandaid. It doesn't solve the problem, it simply moves it around and makes it into a more bearable package. Since the cause, or root, of the problem is not fixed at some point in the furture you will be back in the same position. This time with a full mortgage!

From the sounds of things you are dreaming on the lower payment to relieve stress, I know I've been there. However the real answer comes in taking a real hard look at how you ended up so tight in the first place. Do you have a REAL BUDGET, do you follow it, can you tell us were all of your money goes? Fix those problems and then the refinace can become a tool. You would instantly roll over the new 'extra' money freed up from the lower payment in to debt or additional principle on the mortgage.

Please understand that moving the debt around so you 'feel' better is NOT the way to fix the problem. You have to look back and find out the choices, habits, and behavior which created the situation you are in and replace them with new habits and behavior.

Good luck!

[Dixiechick]

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Is the 1.25% a fixed rate? How much are the closing costs? Factor that amount into the total package to see what your interest rate would theoretically be. If it's still pretty stinking low, I'd do it on two conditions:

1. You understand and realize how you got to be in that situation and know that accruing any more debt is out of the question.

2. The total amount combined that you were paying on all debts now goes to the new mortgage. Not only would you be paying everything down as before, but at a much quicker pace due to the lower interest rate. And if for some reason you couldn't make that payment amount (emergency, etc), you have the option of paying just the minimum.

I think you will find that not only will you be paying less in interest, but you could possible pay everything off quicker...

I'd do it...good luck in whatever you decide.

Dixiechick

[Briansmom]

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I had to stop working due to injuries from a car accident in 2003. I fought for ssd and won and am now receiving money monthly. Living on one income was tough, but we did it. That's how we basically got ourselves into this situation.

There are $0 closing costs, we pay appraisal and other misc fees that total $1200. It is a fixed rate for the life.

[LuxLiving]

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All that new and draining interest is going to be on the front end of a new mortgage. I'd think long and hard about paying them even MORE than you already have! You are probably just now getting to where more of your payment is going toward principal rather than interest and you want to start all over again? hmmmm...listen to boefixpa! It might feel better for the moment, but unless you determine how you've gotten here, you'll likely end right back in the same spot in a few years. A respite at most, not a solution.

[Ima saver]

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I would not go for a 30 year mortgage either!

[Saving in So Cal]

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I have refinanced loans solely to get a lower interest rate, but I always paid extra on the loans to make sure I was truly ahead in the long run.

I realize that extending the loan 30 years would probably give you the lowest monthly payment, but have you considered other alternatives. For instance, can you get a 20-year loan and lower your monthly payments enough to give you day-to-day breathing room without substantially extending the life of the debt.

In addition, I would recommend you review the terms of the loan again. Unless the loan is government subsidized, I can just about guarantee that loan is not fixed at 1.25% for 30 years. There's a rate adjustment or a balloon payment or an equity sharing provision or something you're not aware of. Banks and finance companies lend money to make money for their investors. They wouldn't be able to justify a loan like that to their investors.

I also speak a bit from experience. Before we bought our house, we got a loan pre-approval. The loan had such extraordinarily good terms that I verified all the details with the loan officer three times. Since I make my living drafting and reviewing fine print, I knew what questions to ask and the loan officer gave all the right answers -- three times. However, when we went to sign the loan papers, we took the time to read them before signing and discovered some extraordinarily unfavorable terms that were not disclosed and directly contradicted information I was given by the loan officer. When we balked at the deal, the loan officer acted surprised as if she had no idea those unfavorable terms were there. Needless to say, we got a different loan with a different loan officer.

My point is simply to be cautious. You've been through some hard times and you are a bit vulnerable. It doesn't sound like you've done too badly under the circumstances. It is okay to take the time to consider all of your options and get all of the information you need to make the best decision for your family.

[Dixiechick]

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OK, I disagree with most people here...

IF the loan is truly a 1.25% fixed for the life of the loan, it would make sense to refi/consolidate .... BECAUSE:

The current mortgage with 18 years left is paying over $300/mo in interest. Assuming that the $516/mo is strictly P&I, the original loan amount at 6% at 30 years (assuming 30 years here) was about $86.2K. You have 18 years left, you still owe about $68K (assuming no prepayments were made). The interest portion you are paying now is over $300 still a month! Combining all loans into a 1.25% loan - let's assume everything bumps it up to $100K - the interest protion (paying on it as if it were a 15yr loan at $609/mo P&I only) would only be $104/mo!!! How can you not do this????? You'd be paying it off 3 years sooner with much less money going towards interest!

If it is as you claim - at 1.25% with no prepayment penalties - I would certainly do it yesterday!!!

Dixie

[LuxLiving]

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1.25% FIXED for 30 years w/no prepayment penalties, no huge closing costs, and no balloon? Who is making that kind of loan and sign me up then! Sounds more like a come on to me - maybe 1.25% a month, but 15% a year. These lending folks are tricky and I'm with Saving in So Cal and would be eyeballing that fine print with a giant magnifying glass.

If true - then this type of deal should be making headlines around the US about now w/all those ARM loan folks balking at their increased payments.

Over here looking up waiting for the other shoe to fall...

[Dixiechick]

Re: Seeking answers

1.25% FIXED for 30 years w/no prepayment penalties, no huge closing costs, and no balloon? Who is making that kind of loan and sign me up then! Sounds more like a come on to me - maybe 1.25% a month, but 15% a year. These lending folks are tricky and I'm with Saving in So Cal and would be eyeballing that fine print with a giant magnifying glass.

If true - then this type of deal should be making headlines around the US about now w/all those ARM loan folks balking at their increased payments.

Over here looking up waiting for the other shoe to fall...

RIGHT!!! That's why I highlighted those IFs... But, there may be some kind of loans that only a few qualify for.

My first house I bought, I had to go conventional at 9.5% because I made too much money ($27K) to qualify for the bond funds that were running at 4%. Grrr!!!!!!

Dixie

[Briansmom]

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I appreciate all your comments. My husband and I are not doing this loan. We ran the numbers and don't feel comfortable doing this way. We are going another way which we feel more comfortable which will be taking 3 more years off the mortgage with a lower interest rate. Thanks for all the input.

[cschin4]

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I think you should keep everything separate. Focus on getting the 18% cc paid off or do a balance transfer of that. Then, get the HELOC paid off too. Nobody is going to give you 30 yr mortgage at 1.25%. You better read the fine print on that one. If it sounds too good to be true, it is!
That said, I see nothing wrong with a 30 yr mortgage and I would always opt for a 30 yr rather than 15 because it gives you more flexibility in terms of cash flow. In lean times, it is nice to have the 30 yr because you have more of a financial cushion. In better times, you just simply add to the principal and can easily pay the loan off in 15 yrs if you choose too.
We took out a 30 yr just for that reason, but we were doing well so ended up paying the house off in 5 yrs.