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MilitaryMan19D30 · Jul 10, 2007, 07:03 AM

Bought a home about a year ago. 80% of the loan in a 30 yr fixed and 20% in a variable Helioc (no MI). The Helioc is at about 9% interest right now and we "think" we would like to refinance just that part of the loan- we have no need to borrow against the Helioc and can afford larger payments. Right now we just keep looking at the interets on the Helioc and it seems ridiculous! Also- the home was a repo and a major fixer upper when we bought it and we have done a lot of upgrading- should we wait until we have all that finished and have the house re-appraised?

AtlantaTaxExpert · Jul 12, 2007, 09:44 AM

In my opinion, your best bet is to finish the upgrading, then get an appraisal done. With luck, the appraisal will come in at a significantly higher amount, enough that you would then be able to refinance BOTH the 30-year loan and the HELOC under ONE mortgage.

Further, if you are planning on keeping the house, look at the option of going to a 15-year mortgage. That should cut the interest rate by as much as a point and allow you to own the house free and clear in just 15 years.

Dr D · Jul 12, 2007, 11:06 AM

Really the 9% that you are paying on the second is not bad considering that the CLTV was 100%. If your home is now worth 25% or more than the original sales price, that would support an 80% LTV loan. To determine if a complete refinance makes sense, figure out the "blended" rate of your 1st & 2nd: yearly $ interest on 1st + yearly $ interest on 2nd / Total $ of both loans. If the costs of a refinance / yearly interest saved enables you to break even in 3 years or less, a refinance is probably a good idea. Four years is a toss-up, and 5 years I would say no. Also the spread between a 30 and a 15 year loan is at best .5%. If a full refinance does not make sense, and your second has no pre-pay penalty, you should be able to roll the second at a better rate with your bank (don't go to a mortgage company), because your bank should pay ALL your closing costs. A $25K HELOC might be at prime (now at 8.25%); $50K @ prime - .55%; $100K @ prime - 1.00%. Rates in you area might be different.