Posted on: 21st Apr, 2010 01:50 pm
Current mortgage (25 years, 16 left) is $127,000 at 6.8%. My 2nd (home eq. line) is at $37,000, split bet. 7.6% and a revolving 2.20%, w/ 11 yrs left. Provided I stay there at least 10 more yrs, Is it a good idea to combine them into a 20-yr w/ todays rate of 5.0%? Someone said no, I've paid off too much principle. Thanks!
hi cyncyn,
it would be a a good idea to refinance the mortgage only if you get an interest rate which would be lower by 2% from your current rates. also, you should remember that you would be responsible for paying the closing costs while you refinance the loan. you would be able to offset these closing costs only if you stay in the property for a longer period of time. it can be a good idea to refinance the loan as you would be liable for paying only one mortgage after you refinance both the loans.
it would be a a good idea to refinance the mortgage only if you get an interest rate which would be lower by 2% from your current rates. also, you should remember that you would be responsible for paying the closing costs while you refinance the loan. you would be able to offset these closing costs only if you stay in the property for a longer period of time. it can be a good idea to refinance the loan as you would be liable for paying only one mortgage after you refinance both the loans.
THANKS very much !!!
I've read in recent times that the 2% reduction is old hat and to be discarded as a rule of thumb. The new rule I've seen used is 1%. Essentially, you need to calculate how long it's going to take you to reap the benefit of a reduced rate relative to the costs of obtaining that rate (closing costs). If you can recoup your money in a reasonable amount of time, say 24 or 30 months, then it's to your benefit to refinance. Of course, if you plan to sell a home in that period, it's not a worthwhile endeavor. The other aspect of the calculation is to determine how long you believe you'll remain in the home.
George, you ended up correctly. Recoup costs in 24 to 30 months.
Forget the 2% and the 1%. If someone has a mortge of $75,000 the new rate better be 2% or more less. If someone has a mortgage of $500,000 or higher, refinancing with a rate .5% makes sense. In othert words, the higher the mortgage amount, the less a ratre has to be lower to break even in 24 to 30 months and never ever try to apply a per cent rule becasue that never takes into account the mortgage size nor the break even time.
cyncyn, The fact that you paid so much pricnipal has very little to do with anything. When you refinance your equity in the house is almost the same as it was befroe you refinance (less by closing costs).
If you can refinance from 6.8% and 7.6% down to 5% at those loan balances, do it yesterday. I did not even use a calculator to figure that out.
Forget the 2% and the 1%. If someone has a mortge of $75,000 the new rate better be 2% or more less. If someone has a mortgage of $500,000 or higher, refinancing with a rate .5% makes sense. In othert words, the higher the mortgage amount, the less a ratre has to be lower to break even in 24 to 30 months and never ever try to apply a per cent rule becasue that never takes into account the mortgage size nor the break even time.
cyncyn, The fact that you paid so much pricnipal has very little to do with anything. When you refinance your equity in the house is almost the same as it was befroe you refinance (less by closing costs).
If you can refinance from 6.8% and 7.6% down to 5% at those loan balances, do it yesterday. I did not even use a calculator to figure that out.
No calculators needed to reflect good sense.