what about if you get a fixed lower rate. currently i'm refinacing my current fixed mortgage to pay hight interrest rate credit cards and to make some home improvements . i'm beeing offer a 6.5 rate from the current 6.75 for 30 years.

is this a good idea or not?.

please let me know.

thanks

edison

Rolling credit card debt onto a home can cause you to loose your home. The increase in principal balance and in most instances can work against you as you pay down your mortgage. Refinancing is rarely a benefit as years are added onto the loan, in addition to the reamortization, which involves paying higher amounts of interest at the start of the loan. Calculate your present monthly payment by the amount of months remaining, then calculate your new proposed payment that would be established with a refinance. This should answer the question and reinforce the authors suggestions.

just an observation about the 'worthlessness' of deducting Mtg Int on Tax Returns - most people who have a mortgage are already itemizing on their tax return simply because they have enough MORTGAGE Interest to be able to do so. So this makes me question this guy's creditability about blasting ARM's. He is right in indicating a borrower who is refinancing does need his eyes to be 'wide open'. An ARM is for anybody who understands how to use. It is not a tool for the financially challenged to use.

Edison, going from 6.75 to 6.5 rate is nice, but just to make your mtg broker nervous, ask him to divide ALL related expenses of doing the loan by the amount of the monthly reduction in the payment. This calculation will show you how long it will take you to recover your cost of doing the loan. Or, take the annual payment savings (mult by 12) and divide it by the cost of the new loan. This will give you your return percentage on the investment of doing the loan. Then, make your decision using a financial planner, not the mortgage broker. All the mortgage broker wants is to do the loan and charge you origination fees, or get the final lender to kick-back money based on the interest rate. Ask him/her to explain the 'rebate' that the lender pays the mtg broker for selling you a higher than par loan rate. Have fun!!

to edison: 6.75 to 6.5 sounds good, but how many months will it take to payback the amount it costs to do the new loan? Take total costs of new loan and divide by the monthly payment savings to determine how many months to payback the investment of doing the loan. OR, to have some fun with the mortgage broker, ask him/her if the lender is paying them a 'rebate' for selling you the 6.5% rate, and why is it not being given to you to reduce the cost of doing the new loan. Mortgage brokers hate having to explain how they just made more money above the origination fee. They would much rather explain it when you are at the closing table and cannot easily back out of the new loan. Have fun!!!

to edison: 6.75 to 6.5 sounds good, but how many months will it take to payback the amount it costs to do the new loan? Take total costs of new loan and divide by the monthly payment savings to determine how many months to payback the investment of doing the loan. OR, to have some fun with the mortgage broker, ask him/her if the lender is paying them a 'rebate' for selling you the 6.5% rate, and why is it not being given to you to reduce the cost of doing the new loan. Mortgage brokers hate having to explain how they just made more money above the origination fee. They would much rather explain it when you are at the closing table and cannot easily back out of the new loan. Have fun!!!

This Dan guy's an idiot... He's using fear of the future, as logic to discourage refinancing today, to better a person's financial position situation and reduce monthly outgo immediately. The only thing he says I agree with is to be careful and "open eyed" about the costs involved, and the time frame it takes to re-coup them. If you can, or more importantly, NEED to, consolidate debt and save monthly pmts now, and the costs are reasonable, paying for themselves w/i the first 2 yrs, it makes sense to refinance even into a medium term ARM. (5 yr ARMS are very attractive right now) Here's an idea brilliant boy never suggested... How bout refinancing, paying off as much debt as possible to obtain the most positive cashflo you can get, then take 1/2 yer savings monthly, and reinvesting it into the mortgage repayment on a bi-monthly basis, thereby reducing the effective rate of the already lower rate you're getting, and reducing the repayment term? Now yer still cash flo ahead monthly, have both a lower rate & effective rate, and will reduce the overall term of the new loan, or will at minimum, be reducing the principle balance quicker... Some guys just can't see the forest for the trees...

I am surprised no one has mentioned how long they have been paying on their current loan to help determine if getting a new loan is a good idea. You always pay a greater percent of your interest in the beginning years. For example, a 30 year mortgage - $100,000 loan @6.5% will cost you about $31,000 in interest the first 5 years and you'll only pay 6,400 in principle. The last 5 years of your mortgage will be around $14,000 in interest and $23,000 in principle. In other words if you've been paying off this loan for 15 years you are just now getting to the point where you are making a dent in your mortgage balance, do you want to start paying that high percentage of interest all over again? Look at 15 or 20 year mortgages and see if you can afford them. It's great to have a write off but its better to own your home.

Hey Guys,

Thank you for your responce, to answer Rod, I have only been paying my current mortagage for two years, we made a 25% down payment on the house and there was no money left over for repairs.

I Would like say that, I like Steve's Ideas, pay as much debt we can, get some cash flow and posible pay a by- montly mortgage to lower the interest and shorter the time.

Now the costs involved, are various fees, from application fee to discount points.

By lowering my mortagage to a 6.5 interest rate, and paying off lenders with 20 percent or more, with time, I will have some room to breath.

Thanks

Edison

One thing no one seems to be mentioning are the tracing rules for deducting mortgage interest. Sorry to be a party pooper, but tax representation is my biz. Mortgage interest from loan amounts not used for the purchase or improvements of a residence is not necessarily deductible. Refinancing to pay off car loans or credit card debts can put you in deep doo-doo with our friends at the Treasury, especially since there is a new task force aimed at reviewing the glut of refi's from 3 years ago forward. They are trying to stem the hemorraghing from years of "equity harvesting". Basically, if your equity debt exceeds $100K, interest on any balance over that is not deductible. Also, if your cumulative mortgage debt is over 1 million, the excess on that is also not deductible. Out here in California, those numbers are frighteningly easy to exceed.

Wow! A lot of interesting commentary. Mortgage notes. There are numerous variations and the big question is how does a particular one fit to YOU.
As long as you understand a little basic finance YOU should be able to make your best decision. Let's take Mr. Edison (I am only using what you provided).
You made a purchase. You put 25% down. 25% down should have easily qualified you for a conventional note. You had nothing left for repairs?
Why did you not put 20% down and make the basic repairs/or use the balance of pay down/off credit cards?
What you say you did does not make good economic sense, unless perhaps you used credit card cash to make the down payment. If you did - it's at 20+ % and the wrong move. If this is so, you violated rule #1 - Never extended beyond !5% of maximum ability to pay. You need to keep a cushion. If I read this correctly and you went for a 5 year arm you may have made a good choice, but you only have five years in which to get your house in order. Personally, I expect a serious round of inflation for the next two+ years and if correct, without the cushion area, it is right back to square one.

Refinancing for a home mortgage is only a good idea if the mortgage refinance loan is available to you with good terms and condition. Because of this you can save plenty of your money as the interest rate is low. The article presents important points about refinancing. i came across with a site that consist of very informative facts about mortgage refinance. You can visit and check it now.

Hi Guy's

The 25% down (cash) was the result of sell of our previous home, no credit cards cash advance. With four kids and wife laid off, bills acumulate realy fast.
Jack, where is the site article that talks about refinancing?