Andy,

Although I come late in the game, I thought I would include my thoughts
on this matter:

1. As the HELOC is pegged to the Prime rate, it is advisable to
consider the consolidation given the FED has raised this index 13 times
in a row (with possible increases to come).
2. By rolling your automobiles into the consolidation, you accomplish
three things; 1) Lower your payment (by amortizing a short term loan
into a long term loan); 2) Improve your interest rate on the auto
loans; 3) Convert non-deductible consumer debt into tax deductible
mortgage interest.
3. A 20 yr FRM (fixed rate mortgage) is a happy medium between a 15
and 30 yr note. You might want to do the math to determine if a 25 yr
FRM would offer additional benefit.
4. Have whatever lender you elect to use "do the math" so that you can
see the end result as it relates to future networth, tax deductability,
etc. Do you a total cost analysis, just don't look at the bottom line
savings. Here is an example on what I mean:

http://webpages.charter.net/smiller/TCA_Example.pdf

5. In the event that you are unable to achieve your debt free goals
when you retire, you can consider a reverse mortgage program (you would
qualify at the age of 62).

Good luck in your endeavors,

Scott Miller
Commercial and Residential Lender/Broker

www.RealEstate-IQ.com
www.EZMortgageLoanz.com

<BreadWithSpam[at]fractious.net> wrote
snip
- quote -

What I posted is no more incorrect than any well-reasoned,
back-of-the-envelope calculation is incorrect.

We disagree.

Jim, yes I do itemize and yes my mortgage interest is deductible. After
all the responses I feel I'm leaning towards refi the home loan and the
HEL in a 20 year loan at (I hope) 5.5%. I do have a little extra money
to pay done the higher car loan and then the second. After looking at
my expenses, I really don't think a 15 year refi loan will work as it
will put me a bit tighter than I'd like.

Appreciate your time to reply, thanks!

Andy

"Tess Millay" <elle_navorski[at]earthlink.net> writes:
- quote -

I read the whole post. Elle, I wasn't criticizing you -
just offering a warning for general purposes - this sort
of incorrect math is used *all* the time and, while you
were trying to use it in a constructive way, it is often
used in an underhanded way to try to get people to buy
inappropriate financial products all the time.

My point wasn't "hey - ignore Elle's post" - it was
"hey - ignore this particular number in her post -
and in general, whenever someone uses this kind of
number, be wary *and* aware that the number is gibberish".

It was an aside, *not* an attempt to address the OP's
issue.




--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

<BreadWithSpam[at]fractious.net> wrote
- quote -


First, when someone fails to read the entire post, gently
remind them to do so. My post had an important qualifier on
this point (time value): "But given all the assumptions (and
there certainly are others I don't list but that anyone
acquainted with present and future value calculations would
notice), one could say it's practically a wash."

Second, don't criticize unless you can correct the problem
you're criticizing. Why don't you do the present value etc.
calculations and post them?

I think one of the reasons this thread was headed off into
the wild blue yonder is because no one was willing to crank
any numbers (though Bob had some good intuition) and give
the poor OP something reasonable with which to work. You're
not helping.

I don't own a financial calculator, and this sort of
calculation is not one I have a need to perform these days.
(Contrary to John A. Weeks the Third assertion, I have zero
debt, I own outright my house, small but with two car garage
and pretty nice view, and I drive a much adored 1991 Civic,
which of course I bought with cash, brand new, and love
maintaining myself, and I am damn good at it. Better than
any mathematician, anyway. I have enough to do ample skiing
and recreation and still have money left over each month. So
knock off these ridiculous assumptions which only chill
discussion here.)

"Tess Millay" <elle_navorski[at]earthlink.net> writes:

- quote -

Let's ignore time-value-of-money and everything which
is the basis for fixed-income mathematics by adding up
the total interest and ignoring time...

- quote -

That's not a valid argument. Total interest paid is only
half a fact, as *when* that interest is paid is equally
essential.

The rest of the details aside, please, folks, when someone
tallies up "total interest" without a time context, a huge
red flag should go up in your head saying "ignore this number".



--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

Andy-

I agree with the sentiment of NOT consolidating the cars into the
mortgage (first or second). I saw my parents do this when I was a kid
and it created a few financial problems...

I see "big picture" problem as you wanting to be debt free in 15 years.
The one solution I will point you to has been alluded to in other
posts: pay more than the minimum payments on ALL debts, starting
immediately. $25 extra per month makes a huge difference. Add $25 to
both car loans, the HELOC and your morgtage payment.

My whole suggestion assumes you can find $300/month to pay extra on all
loans.

I would then try to pay off the $7500 car loan first. Lower principle
balance is the reason. Pay an exta $200 per month and this car will be
paid off in about 2.5-3 years.

Pay off the $10,500 car loan second. $228 current payment, plus $25
extra, plus $165 payment from car 1, plus $25 extra, plus the "$200"
paydown money being applied to car 1 should make this car payment
disappear. within about 12-15 months after car 1.

Third, take the HELOC and pay it down/off quickly. This payment would
be $150+$25+$228+$25+$165+$25+$200. This would be paying about
$650/month towards principle. This would pay off HELOC in less than 4
years from when car #2 was paid off.

This system leaves you with only a first morgage after 8 years.

This leaves about $800 per month to be applied as principle payment on
your first mortgage. This is $9600/year would leave only about
$10,000-$30,000 left in principle on the first mortgage after the 15
year period elapses.

The advantage of not consolidating- if you lose income, the payments on
each loan are "lower". If only one loan existed, the higher payment
might be greater than the sum of the 4 individual loans being paid off.

Do you itemize deductions when you file income taxes? Is your mortgage
interest deductable? These answers might adjust my thoughts.

"John A. Weeks III" <john[at]johnweeks.com> wrote
- quote -

We disagree.

- quote -

Isn't this another assumption?

- quote -


Contrary to your assertion, he posted today that he is not
maxed out on debt and can afford the current payments.

- quote -

The OP never indicated what his retirement savings are. For
all we know, he has maxed out his 401(k) and IRA for
decades.

Regardless, he now has some good numbers from Gene and
myself, and some good intuition from Bob, all in response to
precisely what he asked.

I withdraw from this "interesting" exchange with you, John
A. Weeks 3rd.

"anoop" <ghanwani[at]gmail.com> wrote
- quote -

I agree that's a strong possibility. I couldn't squeeze in
every possible permutation here. I just tried to focus on
two that would quickly identify which, if either, option was
superior.

Feel free to run the numbers, using the differentials to pay
down principal as you say, and posting them. :-)

Tess Millay wrote:

- quote -

Wouldn't the OP be better off using the extra money to pay
down the principal even faster, instead of investing it in a
money market account? He'd have to pay taxes on the
gains in the money market account which would further
erode his returns from it.

Anoop

In article <QBcvf.2596$ZA2.1908[at]newsread1.news.atl.earthlink.net> ,
"Tess Millay" <elle_navorski[at]earthlink.net> wrote:

- quote -

It is not a judgement, rather, it is a definition. Add it
to your personal dictionary, and you will improve your standard
of living.

- quote -

We don't have to know any more than what we already have heard.
We have a older person who is nearing the end of their productive
earning years who is not taken care of retirement and is head
over heels in debt, including an interest only home equity loan.
The fact that this loan is interest only tells me that he cannot
afford to pay even a principal payment, let alone pay extra on
anything else.

If this guy doesn't wake up and face reality, he is going to
retire broke. 65 is not the time of life when you want to
be out fighting stray dogs and cats for the scraps from a
dumpster. You should be set by then, and to get there, you
have to have your house in order by the time you are 40 or
45. Time is your enemy after that.

- quote -

Again, this is a person nearing retirement, not a business.

-john-

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

Let's ignore the HE interest only loan for a moment. Then
there seem to be two options we can discuss to help you make
your decision.

Option 1 --
Refi'ing two cars and 104,500 mortgage at 5.25% and 15 years
yields
Monthly payment = $990 for 15 years
Total interest = $54,269

Option 2 --
Refi'ing only 104,500 mortgage at 5.25% and 15 years yields
Monthly payment, first five years = 845+228+165 =$1238
Monthly payment, last ten years = $845
Total interest paid = $49,638.

So Option 2 seems better, because it results in paying $4631
less interest. But one still can't say anything conclusive,
because option 1 would permit you to invest $248 a month
more for five years in, say, a money market fund, while
option 2 would permit you to invest $145 a month more for
the last ten years in, say, a money market fund.

Option 1's extra $248 a month yada yields roughly an extra
16.7k dollars at a 4% rate at the end of five years. At the
end of 15 years, that would be worth about 24.7k dollars.

Option 2's extra $145 a month yields roughly $21.7k dollars
at the end of 15 years.

So option 1 seems better, because at the end of 15 years,
you'll have 3k dollars more with it.

All told, though, the lower total interest of $4631
outweighs the gain of $3k. But given all the assumptions
(and there certainly are others I don't list but that anyone
acquainted with present and future value calculations would
notice), one could say it's practically a wash.

I would go with what's probably less of a headache, namely,
option 2. Also, as you seem to be aware, chances are you'll
be better off in the financial long run if you can get that
interest only mortgage rolled into the new, option 2
mortgage terms.

So now if you wish, you can set the cars aside and deal only
with the two home loans in your queries. Is it worth it to
refi the home mortgage to the 5.25% , 15 year term ? Maybe.
More info is needed. Etc.

<neoglassic[at]peak.org> wrote
- quote -

<neoglassic[at]peak.org> wrote in message
news:1136409692.854862.62370[at]f14g2000cwb.googlegroups.com...
- quote -

I've read your post and the responses to date and your follow up to one of
the responses. I won't get into moral or value comments about whether you
are in over your head or whether you did the right thing financing cars.
There are lots of theories about whether you should or shouldn't pay cash
and there are arguments for and against doing it both ways. You should get
enough information to make an informed decision, but make no mistake -
making an informed decision that is different from what may be recommended
here is not necessarily a bad decision. Of course, it's not necessarily a
good decision either. The trick is to make an informed decision and have it
be the best one you can make when you make it.

Now, on to more informative information.

Using the information from your original post and your follow-up post - your
current monthly payments total $1,185. That's $642 + $150 + $228 + $165 =
$1,185.

If we assume that you keep your current loans and as soon as the cars are
paid off you start putting all those payments against the equity loan then
you'll pay interest only on the equity loan for five more years then pay it
off over the next five years. The total interest paid on the equity loan
from today forward would then be about $15,000. I've roughly calculated
your total interest outlay over the remainder of the other loans to be
approximately $91,000.

The means that the total interest you will pay over the live of the various
loans you have under the current payment provisions is approximately
$106,000.

Let's summarize - your current monthly payments total $1,185 and you will
pay $106,000 in interest over the life of the loans and it will take you 10
years to get to the point where all you have is a single mortgage payment.

If you refi everything into one 15-year loan then your payment would jump
from $1,185 per month to about $1,235 per month. This is an increase of $50
per month.

However, the interest you'd pay on the new loan would be approximately
$72,000. So you'd save $34,000 in interest over the live of the loans. You
would have the new higher payment for 5 extra years. Remember, with your
current loans your cash out doesn't change for 10 more years. With the new
loan you'd be paid off in 15 years.

The question for you then becomes - can you afford $50 more each month,
maintain your current lifestyle AND save for a replacement car over the next
7 to 10 years? If you can honestly answer this question yes, then
refinancing may be the best option for you right now.

But you have to be very careful. Refinancing your cars into your house
means that you'll pay for the cars until the house is paid off. In your
case, with the equity loan being interest only, I don't consider this a
major issue stopping you. After all, you're going to be paying out most of
this money for the next 10 years minimum anyway.

Lastly, I'd advise you to get some financial counseling. Sadly, most people
make it most of their lives without ever getting any real financial
training. I don't just mean financial planning, though a good planner can
be very helpful in this regard.

Good luck,
Gene E. Utterback, EA, RFC

Tess Millay wrote:
- quote -

OP said he was 55 years old. I know *I* wouldn't want to commit to
making over $1200 a month minimum payments until I was 70. I might
/make/ $1250 a month (or more) payments, but I would want to be able to
drop that down again if I'm forced to retire early. So I wouldn't touch
that nice 5.5% 30 year mortgage. OP has to have some excess cashflow
right now to even consider any of this. I would attack the other debts
and pay them off, then start paying extra principal on the mortgage to
get it paid off a few years early w/o ever refinancing.

I wonder about the terms of the HEL. It must come due /eventually/,
with a balloon payment or a change of terms or something. Otherwise,
who would ever make a loan like that? Unless the whole point of the
loan is foreclosure when you can't make the payments anymore.

Bob

thanks for all the comments. first, I'm not maxed out on debt. I can
afford the loans I have and I do need the two cars. I would however, at
least like to get rid of the HEL as I'm making interest only payments.
With $28K on the HEL, make additional payments it'll still take quite a
while to get it paid off. Not adding the cars to the refi is fine with
me, I just wasn't sure if adding them into the refi was a good idea.

Andy

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote
- quote -

The original poster said nothing about not being able to
afford the current payments. All he asked was whether
consolidating the loans he listed into a 15 year loan at
5.25% was a "positive" route to take. Whether to refinance
is a common, reasonable query, IMO. So let's give the
response to this query some real teeth.

One can't run all the numbers with precision without knowing
more about the home equity interest only loan. Assuming for
the moment the refi fees are negligible, one can say the
following:

1.
The original poster's current, total montly payments on all
the loans listed should be, by my calculations (which
someone should check), about $1161, on a total balance of
about $151000. Refinancing at 5.25% for 15 years, and not
counting fees for doing so, will, as Bob speculated, raises
his montly payment by about $61, to $1222/month, but as
pointed out, he'll be paying off the portion that denotes
the car loans for a longer period. Still refi as proposed
has the advantage of paying down some of the home equity
loan's principal. By this measure, and assuming refi fees
are negligible overall, it may very well pay to consolidate
and refinance to a 15 year 5.25% conventional fixed rate
mortgage.

2.
Omitting the interest only HE loan for the moment, the total
interest he'll pay on the current loans over the remaining
25 years for the house loan and five years for the car loans
will be about $91k. If he refi's at the rates and term he
gives, the interest will be less, at $66.7k. Now obviously
one has to normalize all the figures to, say, present value
numbers. Also, one might want to consider only refinancing
the two home loans. But the mere fact that it's way lower
should tell someone contemplating refi that further
investigation is needed before ruling out refi.

To the original poster: When does the "interest only" period
on the HE loan expire? Then for how many years is the HE
loan?

ISTM this gentleman gave the basic numbers with the precise
intent of getting assistance in computing which investment
alternative (of a few) was superior. Or he has someone at a
bank trying to sell him on the refi and wants us to double
check. He deserves a rational, numerical response.

Note: Numbers above will vary slightly depending on the
online calculator used. Bankrate.com is giving me slightly
different numbers.

"John A. Weeks III" <john[at]johnweeks.com> wrote
- quote -

Isn't this a value judgment, rather than a numerical,
rationally based one?

We can't say whether the car payments are high without more
information about the OP's overall financial situation.

Businesses routinely take out loans in a variety of forms.
Whether they deserve condemnation for this practice surely
depends on their overall financial situation.

On Wed, 4 Jan 2006 23:31:55 -0600, "John A. Weeks III"
<john[at]johnweeks.com> wrote:


- quote -

This is something I see all too often - the tendency to focus on the
result of a problem instead of the cause.

In this case the result of the problem is debt and the focus (which
consumes effort and creativity) is how to best handle it.

But the cause of the problem is that the consumer is not living within
his/her means. Until that is properly addressed the rest won't
matter. What we'll have is a consumer who bounces from crisis to
crisis.


-HW "Skip" Weldon
Columbia, SC

John A. Weeks III wrote:
tes is not the key factor.
- quote -


I think you're overlooking one piece of info. In the original message,
he was talking about a refinancing to a 15 year mortgage. My loan
amortization book doesn't go down to 5.25%, but I think the minimum
monthly payment on the home loan will go up by more than the sum of the
current payments of the smaller loans when he goes to that short a term.

But if he can get by with just one car, selling one and applying the
proceeds to the other car loan is the best way to quickly free up
cashflow that can be used to pay off the other car and the HEL. Then
buy a nice 8 to 10 year old Buick (they are good solid cars, get decent
gas mileage, and they don't hold their resale value very well) if you
need another car.

Best regards,
Bob

In article <LO2vf.2940$%W1.1588[at]newsread2.news.atl.earthlink.net> ,
"Tess Millay" <elle_navorski[at]earthlink.net> wrote:

- quote -

Any car that you cannot afford is a luxury car. Having
high car payments and loan terms of more than a year or
two are signs that one cannot afford a given vehicle.

-john-

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