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Refinance 15-Year HELOC

Should I refinance my 15-year HELOC if we are three years into the loan? What are my options?

We need to consolidate our debt and thought we should refinance our current 15-yr Home Equity Loan fixed @ 6.75% - @ $1,553 per mth - we are 3+ yrs into it for a total of $149,139 balance. The credit card debt amounts to about $82,000. We applied to Wells Fargo Bank but they denied it due to three outstanding 401k loans of about $44,000 (debt to income issue) and transferred it to their financial division. The financial branch suggested we consolidate our current 15 yr 1st Mortgage at 4.87% (Wells Fargo loan) (we are about 7 years into it) and the $149,000 current Home Equity plus all the credit card debt and even 401K loans. This will amount to one huge loan at 4.5 % for 15 years at about $4,111 per month (including taxes and homeowner's insurance). This will give us over $3,000 per month additional cash. However, does it realy make sense to refinance the 15-yr mortgage since we are already almost 1/2 way finished? The closing costs seem high they are around $10,000 and are included in the total package. Our credit score is around 727. Also, Wells Fargo gave me a ridiculous quote of 9% if we wanted to refi just the HE loan (naturally they want the big mortgage). My credit union did some fast numbers and came up with a monthly amount slightly less than Wells not sure of pts yet -it was very initial. The other option is find a bank to refinance and consolidate the HE loan and credit cards etc...and leave the 1st mortgage alone. What would you recommend or what are your comments? Neither my husband and I are too thrilled with refinancing our 1st mortgage.

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Bill's Answer
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Highlights

  • Compare amortization schedules when considering a refinance.
  • Select the loan with the lowest overall cost, if you can afford the monthly payments.

Your question is difficult to answer because it lacks key relevant facts. Below is an attempt to help you get started on your issues.

There are not many competitive HELOC products available today, especially if the combined loan to value (LTV) is high. Unfortunately, you did not mention two crucial variables: A) What is the value of the home? B) How much do you owe on the first mortgage?

Basically, the advice from Wells Fargo is a solid plan given the information you shared. If you roll everything into a first mortgage and take as much of the $3,000 a month in savings possible and add it to your monthly payment, this will significantly shorten the 15-year term.

If I knew what your new loan amount would be, I could run an amortization schedule to inform you how many years the additional payments would cut into the 15-year term.

If you can afford the payments, you should also consider a 10-year fixed mortgage. I believe this will provide you with monthly savings and only extend the first mortgage three years.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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