Paid off 1st mortgage. Owe 90000 on a 2nd mortgage/home equity loan. Should I pursue a new loan to refinance?

Deal Score0

I am 46 years old. My husband is 50 years old. The rate is 9.25%.

  1. Reply
    February 22, 2011 at 10:46 am

    Absolutely. With a new first mortgage, you can get an interest rate well below 9.25% — in fact, with decent credit, probably less than 7%. That is assuming that the place is worth more than $ 113,000 so you will have at least 20% equity.

  2. Reply
    February 22, 2011 at 11:17 am

    You owe $ 90K on a 9.25% loan and are asking if you should refinance?

    YES, YES, YES.
    Your currently paying around $ 693 a month in interest.

    Current mortgage rates are around 6.25%. A 3% savings. At 6.25% your monthly interest would be around $ 468.

    We are looking at a savings every month of about $ 225.

    The general rule is if it takes more then two years to see a return from the refinancing, you should step back and reconsider the expense.

    In your case, refinancing would probably cost around $ 1000, which you would start seeing a return in 5 months.

    Refinance, get rid of that 9.25% interest, and start saving a ton of money in interest.

  3. Reply
    Jenny Li
    February 22, 2011 at 12:00 pm

    Good question…

    That’s really hard because of the situation. It depends on a lot of different things; do you need cash to cover debt, or are you planning on retiring within the next 10-15 years. It makes sense to just pay off your 2nd as much as possible, but equity in your home is dangerous because it’s not liquid.

    If it were me, I would refinance everything and do an interest only, or pick a payment loan… that way I would not be sending all my money to the banks, but I’m still very young and have a lot of time ahead.

    Just remember, you should always be saving money on the side.

  4. Reply
    February 22, 2011 at 12:01 pm

    Without a doubt yes. 1st mortgage rates are lower than 2nd mortgage rates. You need to refinance the 90,000 balance into a 1st mtg. When you paid off the first mortgage, the home equity loan essentially moved up to 1st position. So, now your lender has a 1st mtg but you are not obtaining any benefits of a 1st mtg. 9.25% is way to high to be paying depending on your score a conventional 1st mtg is running from 6.50%-7.375% in today’s market. I would also stay away from doing another home equity loan. Those are inhouse loans typically with your lender that offers lower closing costs but the rate is higher than what the secondary market can offer. Go see a mortgage banker in your area. Good Luck.

  5. Reply
    February 22, 2011 at 12:04 pm

    Depends on what you can get a first mortgage for. That depends on your:
    – Credit score & history
    – house value
    – income

    With that rate, I would check. I just did a refi at 6.75%. That would save you a large chunk of money.

  6. Reply
    Greg S
    February 22, 2011 at 12:48 pm

    The reason why your rate is so high is because it’s a “second mortgage”. It riskier to be the “second” in line in case they have to foreclosure on you. I would refinance the “2nd” into a 1st lien. The rate will automatically improve.

  7. Reply
    ted f
    February 22, 2011 at 1:37 pm

    id say yes your payment would be about 528 or better try

    great rates and no middlemen! and straight answers

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