Question on refinance

[s_wilwerding]

Mortgage rates are getting awfully low - I currently have my first mortgage with Wells Fargo at 6.25% for 30 years. 30 year rates are now at 5.25%, which would save me about $100 a month.

My question - I also have a second mortgage with a balance of about $25K that is at 7.25%. I could re-finance my mortgage and take the extra $100 a month and put it towards my second mortgage - this makes sense from the perspective that I should be paying down higher interest first.

Or, I could refinance my 30 year first mortgage to a 20 year mortgage, and my monthly payment would stay about the same. I like the idea of paying off the primary mortgage after 20 years - along the way, I could eventually lump in my second mortgage with my primary, or just pay the second off in a lump sum.

I like the 20 year idea, but on the other hand, 5.25% for 30 years is awfully cheap money, and in this economic environment, having an extra $100 a month might not be a bad idea.

Thoughts?

Addendum: WF is offering re-financing with no closing costs, so re-financing costs will likely be minimal or non-existent.

[Hugh R]

Do the 20 or 15 year deal. You pay mostly interest in the first years of a loan and mostly prinicple in the last years. If you start all over again, you'll be paying a lot more interest over time.

[Rick Lee]

I don't think you can refi a first and not the second. I'd always go with the longer term and then just pay extra. You should also figure out when your break even point is. Divide your total refi closing costs by your monthly savings. You have to stay in the house that long before saving a dime.

[cgarr]

What about a personal line of credit and just pay it off, I have a PLC rate of 3.50% right now.

[Rick Lee]

Originally Posted by cgarr

What about a personal line of credit and just pay it off, I have a PLC rate of 3.50% right now.

What's the amortization on that? One year or 30?

[cgarr]

Originally Posted by Rick Lee

What's the amortization on that? One year or 30?

Its 3.5% on the balance for 5 years because that's how many years I set it up on a PLC of 40k The interest is taken out of my checking each month, its only about $22.00 a month on an 8k balance, I can pay it down anytime I want but my CD's are pulling 5.3% right now. and I can lock in the rate at anytime.

[turbo6bar]

Do you have enough equity to roll both into one? Like, Rick Lee, I'd refi into the longest term with the best rates. Course, a 20 or 15 yr term may present better rates than a vanilla 30 yr fixed.

[MotoSook]

This is related and probably a silly questions as there are so many factors...but where do you guys (Rick?) in the industry see the rates going in the next 12 months? Up and down...sure...but do some of you industry guys think there will be a decreasing trend? Steady or will it go up?

Give it a shot...and why?

[einreb]

I'm seeing 5/1 arms as pricier than 30 year fixed right now. Weird times.

[jorian]

If you are moving to another institution, you can't just refi your first. You would need a priority agreement from the second mortgage holder. I would roll the second into the new first @ 5.25% and if possible use the savings to make extra payments against principal.

[turbo6bar]

The 10 yr treasury bond is a proxy for mortgage rates. 10 yr treasury yields are the lowest in well over over 50 years. Records don't go back further than 1955, so we don't know if this is an all-time record low. Mortgage rates track the 10 yr bond.

The recent fall in treasury yields means mortgage rates are likely to dip a little further in the short term. Long-term--- it's anyone's guess, but I'd be cautious of trying to squeeze more from this turnip. Mortgage rates are near record lows. What more do you want?

[t951]

No.

Bose is junk....plain and simple.

Get a tivoli or a Boston Acoustics......

[MotoSook]

Jurgen,

I agree. It's pretty low now.

I've been tracking the rates for a while using this site:

http://mortgage-x.com/general/mortgage_indexes.asp

I have a 4.85 rate that ends in about a year, so I'm hesitant to pull the trigger early for a 5.25+/- rate for 15 or 30 yrs. I admit I haven't calculated the the differences of the various scenario.

Originally Posted by turbo6bar

The 10 yr treasury bond is a proxy for mortgage rates. 10 yr treasury yields are the lowest in well over over 50 years. Records don't go back further than 1955, so we don't know if this is an all-time record low. Mortgage rates track the 10 yr bond.

The recent fall in treasury yields means mortgage rates are likely to dip a little further in the short term. Long-term--- it's anyone's guess, but I'd be cautious of trying to squeeze more from this turnip. Mortgage rates are near record lows. What more do you want?

[steve911]

Souk--
If it were me, I'd jump on the 5.25% +/- RIGHT NOW and be done with your adjustable. As turbo6bar rightly notes, treasury rates are at historical lows.

Question(s) you have to ask yourself are:
What happens to your 4.85% loan in a year? Is it a balloon payment or does it reset to something (higher) and if so, for how long?
Can you afford the increase in above?
Where's your comfort zone? - locking in a fixed rate now for the term of your loan or saving a few dollars for the next year with a chance that you may pay (substantially) more a year for now.

Personally, I'm a big believer in fixed-rate mortgages, never having to worry about payments going up. Then again, I make extra principal payments automatically each month to pay it down even faster. I'm debt-averse and I don't want to sweat mortgage payments if I lose my job or decide to retire early.

[MotoSook]

Steve,

It is a 7 yr ballon. I never expected to be in the house that long...or rather I expected to move for my job. But as it turned out I didn't had to move.

Here's my thought. See if you industry guys agree.

With Dec., Jan. and Feb. being the slow months of the housing market (at least in this area), and with the economy being what it is, I think the next 2-3 months may see the lowest rates since the low back in late 2002/early 2003. Having said that I don't think this week's rates are at the trigger pull point yet.

Anyhow, over the last couple of years it's been apparent that I wasn't going to move out of the house, so I've been tracking the rates for the best time to pull the trigger. I'm not one to gamble on the house or mortage, so I've been seriously thinking about refi in the next couple of months. I'm thinking the rate at the end of December will be lower than what it is today.

[turbo6bar]

If I had to guess, I'd say mortgage rates will go down a hair over the next couple weeks, but I wouldn't hold breath for 4.XX%. We are in an abnormal environment due to unprecedented Federal Reserve/Treasury department activities.

You got a great deal on the 7 yr balloon. The fact you're may pay slightly more for a 30 yr fixed is really good. If you're really antsy for the absolute best rate, consider a fixed loan with shorter term. You may get the 1/4 point or so that ends the waiting game. jurgen

[turbo6bar]

BTW, the long-term trendline for fixed rate mortgages is up. 2002-3 likely marked the low point for rates.

[MotoSook]

Jurgen,

I'll probably go with a 15, 20 or 30 yr fixed...and the more I think about it, the more I think I should go ahead and do it. I'll never get the rate I have and the 2002/03 rates are not likely to come again unless the feds do something drastic.

[Rick Lee]

I have a 4.375% LIBOR ARM adjusting in a year. But my house is now an investment property, my equity position is not what it was and my income has gone down. I think it's gonna be tough to refi and I might be better off just letting the ARM adjust. It might even go down on its own.

[TerryH]

I've refi'd enough times to recall that you can't leave a 2nd alone and get a new 1st. Something about if you close your old 1st, the 2nd moves up into that slot.