Posted on: 19th Jun, 2009 10:17 pm
home value = $200,000; current 1st mortg balance = $155,978 @ 6.75% apr, current 2nd mortg balance = $39,408 @ 7.99% apr; i received an offer to refinance my 1st mortg 30-yr fixed @ 5.75% but the loan amount will go up to 164,000 with all the fees and points. is this a good idea. i'd save $98.70/mo on the 1st mortg; money which i could pay towardthe 2nd mortgage. is this a good idea (increase my 1st mortg loan amount to pay extra towards the 2nd mortg).
No, this is not a good idea. Consider this; with the new loan your total outstanding would be greater than the current value of your home, which would put you in a negative equity situation. Moreover, the reduction in monthly payments, I feel, does not justify the steep increase in the amount of your loan (by way of points and fees). A refinance only makes sense if the reduction in your interest rates works out to 2 percentage points or more. My suggestion is that if you get an offer to refinance both of your loans into one fixed loan, at a good interest rate, then go ahead and do it. I also suggest that you compare rates and offers from multiple lenders.