Question by tennis: Should we roll our second home line of equity loan into our first which we are refinancing?
We are refinancing our first mortgage. We have a second which is a home equity line of credit at 7.78% We can probably pay it off in 10 years. Should we roll it into our first and refinance both at 5.20% for 30 years? Would the difference in interest rates offset the extra 20 years of payments?
Answer by what
No. Why pay and extra 20 years on a loan that would otherwise be paid off in ten years. I would rather you do better.
First, see if you can get a combined 15 year loan at about 5%. Then may be I’d go for that. If not, then go ahead with the refinance on the house only. Secondly, pay off your credit cards as quickly as you can, while still paying on the HELOC so you can release some extra money to pay off the 2nd mortgage when the cards are done.
But on the second mortgage, you concentrate as much as you can scrape together for principle reduction and pay that off faster than the ten years. Some people, not necessarily you, don’t realize you can add to your principle as often as you want during the month, and as much as you want. This decreases that ten year time quite a bit, even if you are paying 2.58% more per year or .215% per month more. It still beats twenty years more in my book.
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