Save and pay off mortgage or refi?

[Smike]

My wife and I have a mortgage with a high interest rate. We currently have an interest rate of 10.5%. We have had bad credit for years due to outstanding medical bills. Any chance of refinancing are pretty slim. Here are the details;

Our house is worth around $130K conservatively, we owe $73K on it. We currently have $20K in savings and could probably continue to save about $7K a year. Our payments are $729 a month and I have been paying $1000 with the remainder going towards principle. My question is this, should I just continue to save until I have enough to pay the house off or should I attempt to secure a loan using whatever savings I have as down payment? This assumes that a bank would lower my interest rate if I was putting down a significant amount? Would a bank be more apt to give me a loan if I am putting 33% to 50% or more down?

Any insight you can provide would be greatly appreciated!!!

[maat55]

You should have plenty of equity to refi when your credit rating is sufficient. I would just save and attempt to refi when possible. You currently have about 44% equity in the home by your numbers.

Do you have other debts?

[snafu]

Lenders can be as lenient or strick as they wish on any given day, there is no consistency. 1st check which lenders offer the best rates in your area. Make an appointment to see your current lender to ask what they can offer paydown: best rate ratio. See some lenders to compare but be sure to get their list of closing costs as these add up v/quickly.

[disneysteve]

Welcome.

How much do you earn?
Do you have any other debts?
Do either of you contribute to retirement plans? If so, is there a company match and what percentage of income are you contributing?

[Smike]

Thanks for the quick replies!!

As for other debts, we only have a car which we should have paid off this year and one last bill from the collection agency that we have been paying down. We also have our daughter's college tuition which we have been paying cash for so far and have managed to get her through her first two years.

I am maxed out on my retirement fund at work through TIAA-Creff, I couldn't tell you how much is in there or how it is invested. I kind of like the idea of it just accumulating.. One of the bright things to come out of our huge medical debts is that we never had the opportunity to get into credit card debt because we started out deep in the hole... I make $50k and my wife owns her own business and brings home $25k a year, plus a dividend check of $10 to 15K each yea r. I just didn't know if it made economical sense to continue at the same rate of savings and paying down the mortgage or would there be benefit into paying closing costs to try and get a better interest rate and then continue to pay the same amount or more each month..

[disneysteve]

we only have a car which we should have paid off this year and one last bill from the collection agency that we have been paying down. We also have our daughter's college tuition which we have been paying cash for so far

I would stop paying for her tuition and put that money toward the mortgage instead. Let her take out loans for the remainder of her education. They will certainly not be at 10.5%. Then, you could always help her pay them off later if you choose to do so.

I am maxed out on my retirement fund at work through TIAA-Creff, I couldn't tell you how much is in there or how it is invested.

Not on topic for the thread, but this is a HUGE problem. You NEED to know how much is in there, how much is going in each paycheck and, most importantly, how it is invested. You say you are maxed out. What does that mean? What percentage of your gross are you contributing? Is there any kind of company match? You need to be able to answer those questions, not just for us, but for yourself to be sure you are saving adequately and investing appropriately.

I just didn't know if it made economical sense to continue at the same rate of savings and paying down the mortgage or would there be benefit into paying closing costs to try and get a better interest rate and then continue to pay the same amount or more each month..

You need to run the numbers to answer this question. If your FICO is such that you could qualify for normal rates, you may be able to knock your rate down by 5% or more right now. If you plan to stay in the house until this loan is repaid, it would most likely make sense to refi.