Von Bongo

Marty,

It looks like you have 24 years and 8 months worth of payments for your loan your total interest expense will be $296,818.50, plus the .5 point you paid of $1725 plus the $495 underwriting and $225 closing fee (all consideder finance charge for your APR calc). Total finance charge is $299,263.50. Your APR is 5.74%. Not too bad, best deal I have seen on a jumbo.

Budman

Okay,

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.

Or...

#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!

blackhawk

Budman, choice number 2 will only cost you more in the long run if you make the minimum payments. With #1 you are throwing extra at the HELOC so it will be paid off sooner and cost you less through the life of the loan. If you throw some extra money at #2 every month it will cost you less.

Both choices have their advantages. #1 will cost you less IF you continue to make $250 HELOC payments and less closing costs. Plus, a HELOC is nice if you want money quickly, like for your garage. #2 is less interest and really will cost you less over the life of the loan comparing apples to apples, but the closing costs are higher.

Did you think about rolling your HELOC in but keeping it open for the future? I don't know what LTV you're at but that is an option too.

Budman

I am planning to open another ELOC, but hopefully at a more favorable rate. It is at 6.75% now (Prime + 2?) - I would like to find one that is closer to 5%.

I am strongly considering option #2, but paying about $40 extra each month to reduce the term to a 25-year. That drops the total interest paid to around $167K.

If I were to sell the car and apply the $15K to the balance, which scenario works better? Or maybe I should just sell the car and buy a bigger boat!

Thanks for the advice.

blackhawk

If you stay under at a 90% CLTV or lower you should be able to get a HELOC at prime + 1.