Refinance? What do you think?

[dvcgirl]

I know you are solid financially Chicago....you're on your way. But I wouldn't refi, even though I know it can be tempting to just ditch that CC debt. I'd surf the cards to get the lowest rates you can, and throw the extra $250 a month towards the cards. It just gives you some flexibility.

 

[kfeuer]

I agree with the others. The numbers just don't support the risk.

I understand the emotion of wanting the credit cards gone, but you'll get there and you'll get there in far less than 20 years.

Really what you are suggestion isn't going to make them "gone," it is just going to rename them as "additional mortgage."

Great way of putting it, it's exactly what I was thinking. It's certainly not easy paying off debt over the long haul, and the stress can get to you. Is there anything you can do to speed up the repayment process?

 

[timmac]

Right now DH and I have $15k in CC debt. We have 20% equity in our home and 28 years left on a 30 year fixed.

I'm kicking around the idea of refinancing to a 20 year fixed mortgage and pulling out 15k in equity to pay off said CC's. This will drop us to 12-15% equity, but we don't plan on moving for at least 5 years at the earliest, so I'm not too worried about that or the sagging housing market.

Consider just the 15k that you'll be paying back over the next 20 years. At 6.105%, that's 108 per month additional.

Our monthly house payment would only go up by $235 or so (including the mort. insurance we'd have to pay for being under 20% equity).

Based on what I said above, this figure simply doesn't make sense, unless there's a mistake elsewhere in what you've stated. That would imply that just with your current mortgage, moving from 28yrs->20yrs, getting an extra 0.4% in interest, and paying the PMI is only going to cost you 127/mo. Unfortunately, it doesn't add up.

You didn't give us the specifics on what your home is worth, or how much you owe on your mortgage, but it's possible to calculate an estimated range (based on your assertion that you'll still have 12-15% equity), which I'll avoid posting here. Feel free to PM me and I'll try to help you crunch some numbers.

Disclaimer: I'm hardly a financial expert, and don't even own my own house yet... I just enjoy the number crunching side of it.

 

[IDoDis]

Noooooo -- bad idea. Instead take that extra $235 and put it towards your cc payments. Then you keep the equity in your home which you'll need if you move in 5 or 6 years and you won't be paying PMI.

Don't do it -- it's not a good financial decision.

 

[tink2dw]

1. With 15k in debt, you won't even qualify for the refi. Lenders immediately take that amount off your yearly Income reducing the amount of money you can qualify for!!

2. Going from an all time low APR rate to a higher rate?? That just doesn't even track on a good financial move ??

3. It is ridiculous to change anything when you expect to move in 5 years. Right now you are only paying interest on your mortgage and will be for many year to come. If you refi you start all over from scratch, paying a Higher Interest Rate making your payments MUCH HIGHER.

4. You decided to pay for your wedding on the cc instead of cutting costs, So pay it off!![yes, I can say that my wedding cost $300.00 cash] Add the extra money your new mortgage would have cost you to paying off the wedding, before children arrive!

 

[Helene]

My suggestion would be to hold out on making a decision for at least 6-12 months. Here's why:

All indicators are that the mortgage rates will be dropping as the fed tries to soften the landing of the housing market crash. I would wait until next summer to see where it lands. There is a chance that you could lock into a 20yr at a rate that is better than it is now. In the meantime, you can attack the CC's as much as possible and if you do decide to do the re-fi, you'll be rolling less into it & likely at a better interest rate.

 

[tlbwriter]

1. With 15k in debt, you won't even qualify for the refi.

That's an interesting assumption.

Several posters have suggested the OP take the "extra" $235 and apply it to the credit cards. But I don't think she's going to have that $235 unless she pays off the cards with the refinance. Right now she has a mortgage payment and CC payments. If she does the refi, she won't have the CC payments, but her mortgage will be $235 higher.

OP, I swear I posted this earlier, but I can't find it, so it must not have gone through. Are you sure about your numbers? I estimated that your house must be worth about $200K, with a current mortage of about $160K. Refinancing and adding $15K to that balance will give you a mortgage of about $175K. PMI is approximately $70 per $100K borrowed, so your PMI would be around $120. When you add the higher principal, the higher interest rate, and the shorter term, I don't see how the difference will only be $235.

 

[tink2dw]

If the OP can afford to refi and pay a higher mortgage payment, then it seem probable that they can trim the budget and put more money towards the cc bill.