Better to refinance or get a home equity loan?

[HappyGrace]

Just fielding some opinions! We have about $70,000 left on our mortgage at 5.25% We have about $12,000 in credit debt and about $5,000 on a car loan. There is a refinance rate available at our credit union for 2.99%

 

I'm thinking we should definitely do the refi. Is there any way to roll in any of that debt to it?

 

Or would a home equity loan be better overall? Any opinions?

[texasmama]

Short answer - I'm not a mortgage expert but we have done both refi's and home equity loans. I think a refi in your case makes sense. Be prepared for a lot of red tape. The mortgage world has changed dramatically in the past few years. It can be a real relief to roll bad debt into good debt, so to speak. Good luck!:001_smile:

[HappyGrace]

Oh, good, so there is a way to roll the debt into the refi? That would be great-we're right at the edge each month financially.

 

What red tape is there now that wasn't before? Is it a huge pain to refi?

[NicksMama-Zack's Mama Too]

A "cash-out refinance" is what you are looking for to cover your remaining mortgage and the debt.

 

We just did this and are using the cash to finish our basement.

 

Good luck,

 

K

[texasmama]

A "cash-out refinance" is what you are looking for to cover your remaining mortgage and the debt.

 

We just did this and are using the cash to finish our basement.

 

Good luck' date='

 

K[/quote']

 

:iagree: Except we didn't finish our basement with the cash out part.:tongue_smilie:

[texasmama]

Oh, good, so there is a way to roll the debt into the refi? That would be great-we're right at the edge each month financially.

 

What red tape is there now that wasn't before? Is it a huge pain to refi?

 

The big mortgage collapse a few years back means more red tape for everyone, even well-qualified folks. It is doable, but it takes longer and requires much more for underwriters to approve the loans.

[HappyGrace]

Thanks, Texasmama-I see what you mean now.

 

So can you get the same low rate with a cash-out refinance? Or is it different than a regular? (I'm thinking we really need that 2.99%, and wondering if they charge a higher rate with a cash-out refi?)

[texasmama]

Thanks, Texasmama-I see what you mean now.

 

So can you get the same low rate with a cash-out refinance? Or is it different than a regular? (I'm thinking we really need that 2.99%, and wondering if they charge a higher rate with a cash-out refi?)

 

From my limited experience, the interest rate depends on so many factors, including your income and credit score. We weren't certain about the interest rate until we were well into the process and had sent a fair amount of documentation. I suspect that cash out refi's may be scrutinized a bit more. Ours certainly was in spite of retaining a fair amount of equity in our home even with the cash out refi.

[DawnM]

A few things to consider:

 

1. Is your house worth at least 70K plus 20%? Is it worth MORE? If so, you may be able to take out the equity above the 20%.

 

2. Is your credit rating (and your husband's) over 740? If so, you may qualify for the 2.99% rate.

 

3. Is the 2.99% rate a 15 year or a 30 year? Typically it is a 15 year, so look closely at that.

 

4. Are there closing costs and if so, what are they? Will you roll that into your loan as well or pay cash?

 

5. Are there points that need to be paid to get that rate? If so, do you plan to pay cash or roll that into the loan?

 

6. Remember that you will need to pay the appraisal, even if you end up not qualifying.....it is typically around $400.

 

7. Have you run the numbers? How much interest would you pay if you were to just continue paying your mortgage as is? Would you really save interest to refinance? The last few years of a mortgage are the lowest interest, so you may need to carefully check these numbers. BankRate.com has some good calculators.

 

Just fielding some opinions! We have about $70,000 left on our mortgage at 5.25% We have about $12,000 in credit debt and about $5,000 on a car loan. There is a refinance rate available at our credit union for 2.99%

 

I'm thinking we should definitely do the refi. Is there any way to roll in any of that debt to it?

 

Or would a home equity loan be better overall? Any opinions?

[HappyGrace]

A few things to consider:

 

1. Is your house worth at least 70K plus 20%? Is it worth MORE? If so, you may be able to take out the equity above the 20%.

 

2. Is your credit rating (and your husband's) over 740? If so, you may qualify for the 2.99% rate.

 

3. Is the 2.99% rate a 15 year or a 30 year? Typically it is a 15 year, so look closely at that.

 

4. Are there closing costs and if so, what are they? Will you roll that into your loan as well or pay cash?

 

5. Are there points that need to be paid to get that rate? If so, do you plan to pay cash or roll that into the loan?

 

6. Remember that you will need to pay the appraisal, even if you end up not qualifying.....it is typically around $400.

 

7. Have you run the numbers? How much interest would you pay if you were to just continue paying your mortgage as is? Would you really save interest to refinance? The last few years of a mortgage are the lowest interest, so you may need to carefully check these numbers. BankRate.com has some good calculators.

 

 

 

Oh, rats-see, this is all the stuff that gets confusing and makes me want to stick my head in the sand! I would never have known all that stuff. Thanks-I can run this by dh (who doesn't know any of this either, but at least this is a place to start!)

[DawnM]

Well, I would start with this:

 

Ask the CU these questions:

 

1. What length of term is the rate for (15 year, 30 year, or adjustable rate?)

2. Are there closing costs and/or points to be paid for that rate?

 

Then I would run a credit check myself OR have the CU run a credit check on you and your DH.

 

That should give you a good idea as to whether to even look into it or not.

 

Dawn

 

Oh, rats-see, this is all the stuff that gets confusing and makes me want to stick my head in the sand! I would never have known all that stuff. Thanks-I can run this by dh (who doesn't know any of this either, but at least this is a place to start!)

[HappyGrace]

Hmmm...looking more closely, they are calling it a home equity loan to pay off your mortgage. The 2.99% is for $100,000 for 10 yrs at $979 per month. Which is about what we pay now on $70,000 and it is for 30 yrs (maybe 20 yrs left).

 

One thing I'd have to check into whether we'd still get the tax benefits if it is for a home equity loan rather than a mortgage.

[DawnM]

That might be a really good deal for you then. Yes, according to BankRate.com's calculator that is just about right.

 

You will still need to know what fees you will need to pay and you will need to make sure your credit scores are high enough to get that rate.

 

Also, are you calculating your taxes and insurance into the rate? You will need to add those to your total owed per month.

 

Dawn

 

Hmmm...looking more closely, they are calling it a home equity loan to pay off your mortgage. The 2.99% is for $100,000 for 10 yrs at $979 per month. Which is about what we pay now on $70,000 and it is for 30 yrs (maybe 20 yrs left).

 

One thing I'd have to check into whether we'd still get the tax benefits if it is for a home equity loan rather than a mortgage.

[Halftime Hope]

Make sure you read the fine print. Even though they say that it is 2.99% for 10 years, many, if not all of those home equity loans are variable rate, IOW they are 2.99 now, but will fluctuate vs. prime rate. I don't know if that is any different with a CU or not.

 

I had a buyer for my parents' home this summer who found that out the hard way. He was still a good buyer; he just didn't know that that rate wasn't what he *thought* the advertising meant. (That was with BOA, by the way.)

 

best wishes!

[TranquilMind]

Just fielding some opinions! We have about $70,000 left on our mortgage at 5.25% We have about $12,000 in credit debt and about $5,000 on a car loan. There is a refinance rate available at our credit union for 2.99%

 

I'm thinking we should definitely do the refi. Is there any way to roll in any of that debt to it?

 

Or would a home equity loan be better overall? Any opinions?

 

Yes, at that rate, you can refi, assuming you have considerable equity in the house. What you do not want is to be close enough to the value of the house to require PMI. They do not remove PMI after 20% equity today, as they did in the old days. It's forever with many lenders.

 

So as long as you can get a FIXED 2.99 and avoid PMI, do it.

[Crimson Wife]

We just did a re-fi, and had to put cash *IN* to the loan to qualify for the best rate despite excellent credit and income more than sufficient to pay the mortgage. Lenders are so skittish these days that they're wanting 30% equity (and according to friends who work in the industry, it's mostly due to stricter requirements by the Feds in a classic case of closing the barn door after the cow has run away).