Mortgage advice, please

[KelNottAt]

Should we take out a fixed rate home equity loan or refi the current mortgage with cash back?
We’d use the cash (whether refi or 2nd) to put an addition on the house. The addition will likely cost more than the cash, so we have a HELOC we can tap if nec.

When all is said and done, our total loan (1st + 2nd + HELOC potential) to value will be about 73%.

We definitely plan to stay in the house for at least the next 10 years, probably 15, maybe even 20+.

The refi would be a 30-year term, the 2nd would be 15-years (I guess).

TIA,

 

[bdcp]

If you refi you'll have to refi the heloc too. Home equity lines are tied into the first mortgage because they're based on how much equity you have. I would refinance the whole thing into one loan and make one payment or 2 (first and heloc) at the most, but not 3 loans. The only way I wouldn't refi the first is if you have a really low interest rate. You're making it more complicated than it has to be.

 

[canwegosoon]

I guess I would refin..for a home improvement, esp. if it is a structral improvement (addition, kitchen, bath). I would try to keep the term for as short as possible(unless we are talking about a mortage that still has 29 yrs to go and you are refinancing to 30). I like to look at the age I am going to be if I pay the mortage at the current payments. (I have refianced a home 10 months into a mortage, but for me it was because the rate had dropped by 1.7%, we had rewired the home(structural upgrade), the apprasial had increased (18%), so we were able to eliminate the PMI and and I made extra payments to keep the 1 year po.

But I would try to do without the HELOC...very tempting to use, and very very dangerous. I know some financial planners(a famous one I know) recommend them incase something were to happen, but I would rather hear that you have 6 months emergency savings than a HELOC. Good Luck. But take a hard look at why you need the extra access to money.

 

[aero99]

I think a lot more info is needed. Like what rate do you currently have, what would the new mortgage be at, the 2nd mortgage? Is the heloc fixed (most lines of credit are NOT and instead are linked to PRIME which is currently 6.75!)

Also, where are you getting your assesment? Did you recently have it done, are you comparing like houses are going by your town's assement?

 

[tink2dw]

Why would anyone CHOOSE to Pay 3 mortgages on one home???

Fire your Loan Officer and find a friend that processes mortgage loans to help you!!

 

[KelNottAt]

Thanks for the replies everyone. DH and I talked about it last night and we plan to close the heloc and take out a fixed-rate 2nd.

To answer some of your questions:
The current interest rate on our 1st is 5.875. Our heloc is at prime.
Our 1st is a 25 year term, and it's a 2-year-old refi. We will be 65 when it's paid off, if we don't pay-off early.
We've had the heloc for 6 months and haven't used it once. We originally opened it for a different home improvement, then cancelled those plans in favor of the current project.
We have 7+ months of emergency cash on hand in personal savings. In addition, DH is self-employed and his little company has 20 months of his salary in reserves.
I base my amatuer appraisal on 1) our 2-year-old refi for the current 1st, and 2) four comps in the neighborhood.
Finally, I was considering 3 loans because we like to pay-off early. In my pea-brain, I could picture us paying the 1st slow and steady for the entire term, and aggressively accelerating the payments on the 2nd and/or heloc. Then, after about 10 years, right about the same time the kids get out of college, we'd be back to just paying our puny first, and coasting through the ends of our careers. (All college savings are already in place.) To me, it was not very appealing to borrow 175% of our current first in a refi and get stuck with a big new payment for 30 years. I thought many mini loans would allow us to shed the debt easily and quickly. However, that idea is now dead.

Thanks again for the opinions,