Refinance or Not

I have paid my loan down aggressively. Does it make sense to refinance at this point?

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Bill's Answer: Bills.com Resident Expert
By any historical measure, Q4 in 2010 is an excellent time to refinance with interest rates at levels not seen in several generations. The answers to your questions are in the numbers. You did not mention how often the HELOC will adjust and what the caps on the adjustments will be. Also, I am not sure how much interest you are paying on your primary mortgage and how much is going to principal. The less you are paying in interest, the less benefit there is to refinancing. If you are confident that you can pay the balance off in five years, I think the 5-year fixed ARM is a solid deal. I suggest that you crunch the numbers this way:

  1. What would your total costs be, were you to maintain your two current mortgages and pay them as you plan?
  2. What would your total costs be, were you to take the 5-year ARM and make the same monthly payment as in the first scenario?

If option two saves you the most money, then weigh how comfortable you are in the ARM. If you are very confident it will be paid off, go for it. If you are not so confident, the ARM may not be the way to go. However, even if it takes a bit longer than five years to pay off, you will owe so little at the end of five years that the potential upward adjustment on your remaining balance is likely to not be very significant. I recommend you shop around for the best loan you can find. Start by visiting the Bills.com refinance savings center to get no-cost quotes from mortgage refinance providers. I hope this information helps you Find. Learn & Save. Best, Bill Bills.com

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