I thought I had this all worked out as to which way I was going on this refinance. Here are my options:
#1) Convert my current 30 yr ARM (int rate=6.5) to a 30 yr fixed, and keep my equity line balance of 12,600 (int rate=6.75%). We will probably be increasing the ELOC by several thou inthe near future to finish the garage that we are building. It will cost me $250 to convert to the mortgage, and I can get locked in on a 30-year at 6.5%, no points. My monthly payments will stay the same. Right now we are paying an average of $250/month on the ELOC, which would pay off a 20K balance in about 104 payments. Between the two loans the total interest charges would be around $180K.
#2) I could do a standard refinance and roll the equity line + the previous mortgage into one loan. My bank told me they could get me a 30-year at 6.25% for around $800 closing costs. The up-side to this is that it would lower our total monthly payments by $157. The downside is that we would be paying almost $20K more in interest over the life of the loan, assuming that we don't pay it off before 30 years. At first this looked like the better deal, because we will be paying for daycare expenses soon that is going to make things kind of tight. That extra $150/month looks pretty attractive. But I grit my teeth at the thought of all of the extra interest. Pay me now, or pay me later!
One extra angle to all of this: I have been considering selling off one of the "toys" to help pay off the ELOC, as painful as that would be. This would knock it down by about $15K. Can anyone tell me if I do the same thing with scenario #2 (i.e., apply the $15K to principal of the mortgage) how I would come out? How much interest would I save by doing this? I have not been able to find any calculators that will show me how a lump-sum payment will change things.
Thanks for all the help!