Last August, I began looking at the possibility of refinancing my mortgage to lower my interest rate and, hopefully, roll my HELOC, and possibly my student loans, into one payment, which would be lower than the current minimums, with the intention of reducing my repayment times and costs.  The mortgage broker was unable to get me a low enough interest rate at the time, and I let it drop.  Thursday she contacted me to let me know that a low enough interest rate was now available, and was I still interested.  I'm not quite sure... so I'm looking for opinions.  Here is the data:

1st Mortgage balance:  164,028.04     interest rate:  5.5% fixed    minimum payment $1049.27 (not including escrow) - current payment $1099.27 (not including escrow)

HELOC balance:   $36,603.34  interest rate:  prime - 0.51% (currently 3.99%) variable    minimum payment 1% (approximately $125) - current payment $400

Student loans:  $4,617.35  interest rate:  6.125% fixed  minimum payment $72.33  - current payment $400

Total amount owed:  $205,248.73

Minimum due per month:  $1246.60

Total amount paid per month:  $1899.27

Proposed refinance:  based on loan of $212,000, including paying all of the above and fees - will be reduced slightly to reflect the lower balances compared to August.  The value of the house is roughly $280,000, so going over 80% loan-to-value and having to pay property mortgage insurance is not an issue - that's about 76% loan-to-value, so there's wiggle room depending on the appraisal.

Interest rate:  4.5% fixed

Fees:  1% origination $2120, .75% loan discount $1590; total fees including these would be $8733.60

Minimum payment $1334.17 - but I would continue to pay the extra money above, so $1899.27, so an extra $652.67/month

The repayment period would be roughly the same - sometime in 2021 either way, assuming I never increase my overpayment - but the interest charges would be roughly $15,000 lower.  However, if I stay with what I have now, my student loans will be completely paid off in August 2010, and, should my financial situation change, I will have much lower minimum payments; likewise, at my current rate of repayment, my HELOC (which will get the $400/month from the student loans rolled into it as soon as they are paid off) will be repaid in about 5 years, again reducing my minimum payments in case of problems.  So it's not just the cost - based solely on that I would take the refinance - it is also a question of reducing my expenses in case of changed financial circumstances.  Due to car repairs and plumbing repairs, my savings are down lower than I would like, and in the next 5-10 years I will need to replace my roof - having an active HELOC is a fall-back for those expenses, but the rate is variable, and that concerns me.

I would like to pay these debts off as quickly as possible - they're the only debts I have - but I am concerned about increasing my minimum housing payment and not having the funds from the student loans and later, the HELOC, available if I need to adjust my payments in the future.

What would you do?

 Dear Karenteacher,

     Personally, I wouldn't refinance if I was you, and probably for some of the same reasons.   I think you did an excellent job of analzing the exact situation and I probably don't know three people that would or could come up with the exact numbers to look at it rationally.  You are obviously a very discliplined person.  You also pay your own escrow (obviously) and utilities, food, etc........so in my eyes....YOU ROCK!!!!  I agree with you, you will have the student loans paid off VERY soon and can then roll it into the HELOC and that will come down fast!  I know you don't like the viable on the HELOC, but I don't see any real reason Prime should change much for the next couple of years minimum (but I have no crystal ball).  I think some people may not understand, but to me, peace of mind can be a lot more important than an actual interest rate.  I have a real hard time with the "unknown" future, especially if you are a single woman.  I would rather keep the old minimum payments, adding more on just like you do now, then have to hit a hard number.  If 3-4 years from now something happened....I don't know what......and your income dropped you could pay the minimums probably.  But, if you refinance, you have to make them.   I'd rather have the wiggle room.  Karen this is just my opinion, you do whatever you want to.....either way, I know you'll be fine.

Phyllis

 Dear Karen:

Your ideas for refinancing or not to refinance are based in traditional  knowledge of how to pay a mortgages. A new mortgage repayment service has a completely different approach to paying the mortgage. In the end you could be finished in TEN Years or less instead of the 21 Years you are scheduled to pay based on your existing repayment plans.

Just count the savings you will make if you are done 10 Years early....

 This Smart Mortgage Repayment plan will introduce you to new money saving ideas. THe biggest savings will come from shifting your Mortgage Interest Costs so the Taxman will share some of those costs.

Secondly, these fast repayment strategies show you how to work with investments. But those investments are focused on your fast mortgage repayment objective.

The biggest hurdle is for you to have an open mind to apply new concepts. These new ideas are sometimes above the heads of Mortgage Brokers and Bankers. These two Professions have one traditional way of payng a mortgage  and that is s l o w...(25, 30, 40 Years). Usually, Mortgage Brokers and Bankers have no expertise in creating a fast repayment plan that helps you. These professionals are usually trained to give you a mortgage not to help you to pay it. You  must find a professional who has expertise in fast-paying a mortgage..... And BELIEVE WHAT THEY SHOW YOU.

You would be pleasantly surprised.  Feel free to ask for an in depth analysis of your very own Fast Pay Plan if you so choose.

Cheers

Debt Eraser

PS. Not sure if I am allowed to give my contact info...

phygar:

 Dear Karenteacher,

     Personally, I wouldn't refinance if I was you, and probably for some of the same reasons.   I think you did an excellent job of analzing the exact situation and I probably don't know three people that would or could come up with the exact numbers to look at it rationally.  You are obviously a very discliplined person.  You also pay your own escrow (obviously) and utilities, food, etc........so in my eyes....YOU ROCK!!!!  I agree with you, you will have the student loans paid off VERY soon and can then roll it into the HELOC and that will come down fast!  I know you don't like the viable on the HELOC, but I don't see any real reason Prime should change much for the next couple of years minimum (but I have no crystal ball).  I think some people may not understand, but to me, peace of mind can be a lot more important than an actual interest rate.  I have a real hard time with the "unknown" future, especially if you are a single woman.  I would rather keep the old minimum payments, adding more on just like you do now, then have to hit a hard number.  If 3-4 years from now something happened....I don't know what......and your income dropped you could pay the minimums probably.  But, if you refinance, you have to make them.   I'd rather have the wiggle room.  Karen this is just my opinion, you do whatever you want to.....either way, I know you'll be fine.

 

Phyllis

Phyllis -

Thanks - that's pretty much what I'm trying to figure out, if it's worth refinancing to consolidate everything and only owing one, larger, debt, or if I'm better off paying off the student loans and then further accelerating the HELOC - which will reduce that minimum as well, as the required payment, as with a credit card, drops as the balance drops - there's something to be said for reducing my required minimum payments by keeping on as I am, and that's where I'm currently leaning.   While it will save me money in interest to refinance, it won't actually reduce my monthly expenses in any meaningful fashion or speed up my repayment... it will only change how money is allocated.  Also, leaving everything as it is means I will have more equity in my home as a cushion in case of further swings in value is something I worry about - ending up owing more than my house is worth is unlikely given the location of and quality of my neighborhood, which didn't lose more than 5% while other areas went down 20% or more, but it's another piece of the puzzle.

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Debt Eraser - no matter what I do, my mortgage will be paid off within 10-11 years if I continue as I have been - which means 16 years total at the outside.  If I continue to add to my acceleration plan as I intend, it will be closer to 7 years, for a total of 13.  I'd rather avoid a higher mandatory minimum, which is why I'm not looking at 10 or 15 year mortgages, although I could certainly get a 15 year mortgage if I wanted to do so.

As far as the assumption on your web site that teachers are only paid during the school year... it's just not so - I know of very few teachers who are still paid on the 9- or 10-month plan (mostly only those who chose not to switch to a 12-month plan when given the option about 20 years ago in my part of the country), and I get paid year round, 1/12 of my annual salary per month.  If I wanted a summer job, I could easily get one - but like most teachers, I spend the part of the summer taking mandatory recertification classes, and actually taking time off to relax during the rest.  I'm simply not interested in your program; it does not fit my financial situation, my needs, nor my inclinations.

Debt Eraser:

This Smart Mortgage Repayment plan will introduce you to new money saving ideas. THe biggest savings will come from shifting your Mortgage Interest Costs so the Taxman will share some of those costs.

This post looks like spam to me, especially since this "Debt Eraser" person has never posted here before.

Karenteacher, I agree that your smartest move is to pay off the student loan first, because it's both the lowest balance and the highest interest rate.  You can get it paid off quickly and snowball the money into your HELOC.

haverwench:

This post looks like spam to me, especially since this "Debt Eraser" person has never posted here before.

"Debt Eraser" followed the rules of making a post containing information that was relevant to the topic. 

haverwench:

Karenteacher, I agree that your smartest move is to pay off the student loan first, because it's both the lowest balance and the highest interest rate.  You can get it paid off quickly and snowball the money into your HELOC.

After looking at all of the options and the costs involved, that's what I decided to do instead of refinancing.  I could have chosen to refinance, but the up-front cost involved meant that the payment wouldn't go down and much as I hoped/expected, and there wasn't enough left to pay off the student loans, so the savings were less significant... and paying off the student loans will reduce the minimums I owe, while doubling  what I pay the HELOC.

I do think that "Debt Eraser" was trying to sell something, even if the post was within the guidelines - as I said previously, the assumptions made on the referenced site were not correct for me and my situation, nor for the teachers I know, so I find myself uninterested in anything the site promotes based on those incorrect assumptions.

Thanks for the input!