Financial question: related to mortgage and equity line.

[reesecup]

To you guys that are on here that offer great financial advise, I have a question!

We have right at $30,000 left on our first mortgage. Should be paid in full in 2/3 years. We also have an equity line though for about $49,000. We are debating whether we should refinance and include the 49,000 or pay off the first and then go after the second like crazy.

Equity line is about 3 percent right now.

First mortgage is 5 percent.

Another kicker, is our daughter is going off to college next year. We MAY get a little help with FAFSA but I kind of doubt it will be too much. My husband and I are both self-employeed so that may help a little. Anyway, we are also needing to plan on paying that as well.

Oh, and we currently have great credit.
Hope someone can offer some advice here.

Thanks

 

[pumpkinmomma]

With the low rate for the equity loan, I would just leave it as is and pay it off as soon as you can. If you refi, you will have to pay some closing costs and I doubt you will get enough interest savings to make up the difference.

I am assuming your equity line is variable interest, right? If so, you may find that the rate goes up on it eventually but I doubt that it will go up enough to make the refi worth it. Since its s relatively small loan I wouldn't bother refinancing. JMO.

 

[reesecup]

Thank you so much for your opinion. That is what I told my husband but he was thinking maybe we should group them and refi for the current rate. I just thought we should get the original done and then we can tackle the other a lot faster.

 

[mistysue]

I agree refinancing would probably waste your money.
What would the new rate be? It sounds like you are thinking of spending a couple thousand to refinance- just so you can likely pay more in interest overall.
I would pay off the 5% ASAP and then work on the 3%.

 

[beaucoup]

We used our home equity line to "refinance" our small mortgage balance when we had it, because the equity line rate was lower.

No closing fees. Banks don't like to advertising doing it that way though becuase they don't collect the fees. It was my idea & told them that's what we wanted to do.

Then paid it all off ASAP in just a couple of years.

 

[annabanna]

I'd pay the highest interest rate first.

 

[scrapquitler]

To you guys that are on here that offer great financial advise, I have a question!

We have right at $30,000 left on our first mortgage. Should be paid in full in 2/3 years. We also have an equity line though for about $49,000. We are debating whether we should refinance and include the 49,000 or pay off the first and then go after the second like crazy.

Equity line is about 3 percent right now.

First mortgage is 5 percent.

Another kicker, is our daughter is going off to college next year. We MAY get a little help with FAFSA but I kind of doubt it will be too much. My husband and I are both self-employeed so that may help a little. Anyway, we are also needing to plan on paying that as well.

Oh, and we currently have great credit.
Hope someone can offer some advice here.

Thanks

Personally, I'd probably leave things as they are. If you've only got 2/3 years left on your $30,000 first mortgage, you aren't paying that much dollar wise in interest, most of your payment is going straight towards principal. If you refinance, you'll be paying a lower rate of interest, but your total $$ interest will likely increase because you'll be starting at the longer term again when most of the payment covers interest.

 

[amcnj]

The interest rate for the refi and closing costs make a difference. I would work through the numbers and see if it really makes sense at this point. As suggested earlier, using the home equity line to pay off the mortgage is another possibility, again depending on rates (if the home equity is variable you could get caught should rates start to climb, or if it can be converted to a fixed rate, what that rate would be makes a difference). And finally given a child approaching college, your overall finances make a difference. If you might need to access cash to pay tuition, even if temporarily until some other assets become liquid, having the home equity line available might come in handy. At this point in the life of the first mortgage you probably really won't have much interest being paid on it over the next 2 or 3 years till it is paid off.