In article <c338eb82.0407270944.7b47054f[at]posting.google.com> , Brad
<floyd_fan[at]charter.net> wrote:

- quote -

The 2nd option is less risky since interest rates have no where
to go but up. You could find yourself with much higher payments
in the first option. The 2nd option is only a quarter point
higher on the fixed side.

The key question is why is the H/E loan 7.75% in the 2nd example,
but only 5.75% in the first example? H/E loans are in the newspaper
here for 4%. What is the status of your credit?

It would really help here to have some numbers to work with, and
some info on family income and other debt.

- quote -

Two...

1) Why get divorced? It would be much better financially to stay
togather. Have you explored all of the options to maintain your
family intact? After all, you told the big guy that this was for
better or worse, good health or ill, until death do you part.

2) Why keep the house? If you have toasted your credit and are
looking at expensive high-risk loans, this might be an indicator
that you should sell the house and rent until you can get back on
your feet and have at least 20% to put down on a home purchase.

Just make sure that you are not moving from being married to a man
that you cannot live with to being married to a house that you cannot
afford.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
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Brad wrote:

- quote -

A lot of this is going to depend on how quickly you pay down the
home equity line of credit, since that's the main exposure on option
1 (that the rate on it rises dramatically with a large balance on
it). As well, what are the rules involved with the rate variables
on the two HELOCs? Are both pegged to the same underlying rate,
with the amount added to that rate being the only difference? Or
are there other terms on the loan that could impact how they would
behave?

I would suggest using a spreadsheet to do some "what ifs" here.
First, determine how you expect to repay the loans--are you going to
put anything to principal on the HELOCs prior the 15 year
expiration? And if you are, how much do you plan to put there?

Once that is set, just start playing with interest rate changes to
see what happens to you over time.

If you can afford to pay the fixed rate mortgage in Scenario 2, I
have to assume you could afford to direct the same level of payments
towards the two mortgages in Scenario 1 and, by doing so, hopefully
reduce your exposure to interest rate changes by working on
eliminating the balance on the HELOC.

--
Ed Zollars, CPA
Phoenix, Arizona

Quick background:

I'm getting Divorced. We own a home together, with a 1st and 2nd
mortgage. I have no readily available "cash options" for closing
costs, or other payments. So, as part of the settlement, I have to
pull an additional $42,000+ out of the equity during refinancing,
which will cause any lons to put me close to a 95% LTV ratio. Out of 5
lenders I've contacted thus far, only 2 have come up with any plan to
make this happen for me.

So here's my question...which of these options is better (assuming I
have no intention of selling the home within the next 10 years, and
assuming all closing costs are equal)

#1) 1st Mortgage for 57% value (covers existing 1st only), 30 year
fixed at 6.25%
HELOC for 38% value, 15 year variable at 5.75%

or

#2) 1st Mortgage for 80% value (covers existing 1st and 2nd), 30 year
fixed at 6.50%
HELOC for 15% value, 15 year variable at 7.75%

I like the idea of having more money in the 1st, at a fixed rate, with
a longer term, but can't figure out if the difference in interest
rates makes it a bad choice.

Any help or advice would be greatly appreciated.