Home Mortgage..Should we refinance... (loan, fixed rate, interest, heloc)

[tionne317]

Well here are the numbers....We're only considering this because I am no longer working due to childcare issues.

1st mortgage balance 145K 30 yr fixed @ 5.1% - pymt is $1249 mth.
2nd mortgage balance 32K 10 yr adjustable now @ 9.74% -pymt is $263 this month and this changes monthly.
Home value is between 205K-210K

We have good credit 720-740. We would like to pay off some credit cards to free up the monthly amounts paid the cc.

Do you have any recommendations of good mortgage lenders. There are so many, we don't know who's good and who's bad.

Thanks everyone, I appreciate your inputs.

[UseJeff]

First off, you have an outstanding rate on your first mortgage. Do not touch that if at all possible. Your rate on your 2nd is currently too high for what you qualify for, even if you have to go "stated income" meaning you don't qualify proving your income. With you out of work this may be the case.

So in my opinion you basically have two choices, refinance the 2nd mortgage and get a better rate, or refinance the 2nd mortgage, take cash out, and possibly get a better rate.

Due to your 2nd mortgage being so small (this is relative, I do CA loans), I personally think you will get the best deal through a bank.

Before we move on, there is a question you need to ask yourself first. Assuming you get a full value of $210K you can get around $30,000 in cash. Do you have $30,000 in CC debt or other debt you plan to pay off? If the credit cards are minimal, then a HELOC (home equity line of credit) may be the best way to go. These are almost always interest only payments, and almost always adjustable rates.

Now, if you want a chunk of cash, a fixed rate 2nd could be better. You can generally get a lower rate, and possibly interest only.

Another thing to consider is how the rate changes at equity tiers. You have about 16% of equity in your house, and you can assume any new loan will at a minimum get you to having 10% equity left. Your rate will almost always be higher for every 5% of equity you take out closing on the 100% financing mark.

Now, if you don't need a ton of money, but you want a safety net, then I would definitely go with a HELOC. I would contact US Bank first, as they have HELOCS below prime (prime is at 8.25% and is the most common index that HELOCS are based on). I would ask for a heloc getting 95% and 100% of your value. Consider the difference in interest rates, then make your decision from there. A HELOC is a revolving line of credit, so you can draw and repay just like a credit card, typically for 5-10 years.

If you don't qualify with US Bank, try Bank of America... if they say no, then you'll likely want to look up a local mortgage brokerage to do your loan. Your personal bank is never a bad place to look also.

Hope this helps

I'm brand new to this forum, and will try and check back as often as I can. I've decided now that my website is mostly up and running, that I'd spend some of my dead time helping on forums. It's sort of a slow time for us mortgage folk