On Mon, 19 Feb 2007 15:09:29 -0600, "jIM" <noreplysoccer[at]hotmail.comwrote:

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-HW "Skip" Weldon
Columbia, SC

kastnna wrote:

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First, my current HELOC is now 7.74% (I think that's prime -1/2%).
Getting the HELOC along with the first is probably a good idea, but with
your further note, I think you are getting a bit tight on loans to value
ratio. When I started the refinancing, the 1st mortgage was about 50% of
the home's value, and HELOC, another 10% or so. With no other debt, and
retiring the car loans, the bank may not have an issue with this, I
can't say. (good luck, let us know how it goes)
JOE

On Feb 19, 3:02 pm, "kastnna" <kast...[at]auburnalum.org> wrote:
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Find out what the HELOC terms are- we got a 15 yr ARM on our HELOC
which was prime+1. 7.25% looked good when we closed, but it jumped
once per year and is at 9.25% now. (Hence the reason we wanted to
refinance).

Our 15 yr ARM was really 10 yr interest only, then last 5 years
ammortizes the remaining balance. I caught this after year 1 when
doing a financial checkup over the holidays. A 30 yr fixed second
mortgage with a 15 yr fixed payment is much better financially for
us. 15 yr fixed was a lower payment than the 15 yr ARM, so decision
was a no brainer.

Our refinance would have been cheapest if we stayed at our current
lender, but our current lender could not get us the competitive
interest rates lending tree.com could.

HELOC closing costs will exist, but probably won't be the large part
of the closing costs. Most money at closing will be associated with
first mortgage (is my experience).

Here's an additional line of thinking that you guys might be able to
help with.

We are using an 80-10-10 loan to avoid PMI. We are putting 10% down
out-of-pocket, the mortgage is for 80% and a second loan for 10%
dodges the PMI requirement of 20% (this last 10% is essentially a
HELOC isn't it?). The mortgage is at 6% and the second loan is at 8%.

However, we have the option of paying only 5% out-of-pocket and taking
15% on the 2nd loan. This would essentially give us an extra $20K in
cash to pay the car loans, but increase the 8% loan by $20K. maybe
this is the route I should explore?

On Feb 19, 12:55 pm, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

Thanks for the info (you too jIM). As JOE pointed out, I am looking to
minimize overall debt expense, not lower my monthly payments. I would
obviously need to continue (or hopefully shorten) the loan repayment
schedule that I currently have in place.

I was mainly thinking that aside from closing costs an 8.6% HELOC
repayed in 3.5 years would be better than a 8.6% auto loan repayment
for 3.5 years simply because the interest expense is deductible on the
HELOC and not on the auto loan.

One more line of questions. I have secured financing on our new home,
but we haven't closed yet. If the other variables make the HELOC an
advantageous plan for us, can I reduce or eliminate closing costs on
the HELOC by having it done along with the mortgage that is currently
in the works? Is that even an option the bank will consider? Am I
being foolish to think the HELOC may be 9% or lower?

kastnna wrote:
- quote -

It matters only in the sense that if you then pay the equity line over
10 years, you will have done a bad thing. If you arrange the line and
tap it to pay the car loans, and then make the same payment, you should
fine that you come out ahead, and turned the interest into a deduction.

A few years back when I refinanced, short term rates were 1% or so, and
I decided to pay the mortgage principal down, while arranging an HELOC.
Since then, I refinanced the first mortgage another two times while
preserving the HELOC. The mortgages and HELOC were all no point/no
closing. What is missing from this is the risk that HELOCs bring. Easy
access to money with low payments. If used wisely, it can get you
through a (short) period of unemployment, or get a cash price for a car,
etc. If used wrecklessly, it can get you a 10 year payout on big TVs and
expensive clothing.

Often, the bank providing the first mortage is the best place to start.
JOE

On Feb 19, 12:53 pm, "kastnna" <kast...[at]auburnalum.org> wrote:
- quote -

HELOCs will have a higher interest rate.
HELOCs with "cash out" will have a higher interest rate than that
(cars would be considered "cash out" to most banks).
Once a HELOC is "cash out", there are limiations on converting this
debt (to other HELOC or 2nd mortgage loans) because the loan is
flagged as "cash out".

The HELOC interest should be tax deductable. Closing costs vary. If
you escrow propety taxes and insurance, 4-6 months of these expenses
will be needed at closing.

When we bought house (new construction in Dec 2005), closing costs
were ~8k. Closing for the refinance is around 5k.

I am in middle of refinancing and rates dropped to 5.875% this week.
We have 5.75% with a buy down on the rate (the cost of buying rate
down is included in the 5k closing cost above... $1700 or so is cost
for us to buy down .6 of a point. The cost to buy down depends on
amount of money financed (some of your 40k might be better spent
buying down rate, might be a whole other discussion).

If you have a "good faith estimate", this document should approximate
your closing costs.

My wife and I are in the process of purchasing our first home and
could use the groups thoughts on debt management.

We have no other debt except our car loans. I currently pay 8.6 - 9.0%
on both of those loans and have about 3.5 years left. The balance of
the loans totals $35K. We are putting almost 40K down on our house
(which I understand to be "instant equity"). The interest rate on our
mortgage is 6% if it matters.

I am wondering if we would benefit by immediately taking out a HELOC
and paying-off the car loans to reduce interest expense. Can we take a
HELOC this soon? What kind of interest rate can we expect (similar to
our mortgage or more)? Are there substantial closing costs that would
consume any savings? Is the HELOC interest deductible like our
mortgage interest?

There are no penalties for paying-off the car loans early. Does it
matter that I would be paying-off depreciating assets and increasing
debt on an appreciating asset? Am I neglecting other factors?

Thanks in advance.