- quote -

A 30-year fixed rate loan at 5.375 percent is excellent, and about 50
basis points below the going rate these days. 15-year loans are running
about 5.25 percent currently, which means that the original poster is
unlikely to find one at his dream rate of 4.625 percent. And even if he
does he'll probably have to pay some points and there are always closing
costs to consider.

Far better, it seems to me, would be to pay down the second loan. That
would accomplish the same goal (building equity) but without incurring
transaction costs. Even a few hundred a month would make a big difference.
Precise numbers can be calculated using the handy and free financial
calculators found at:

www.hughchou.org

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On Jan 9, 12:30*am, Bill Woessner <woess...[at]gmail.com> wrote:
- quote -

We refinanced a similar 80-10-10 loan last year around this time. We
bought some points down to 5.75% on the first. The rate on the second
is 7.25%. I don't remember the break even point, but it was around 2
years.

I haven't even looked to see if I could do better, because the points
I bought (paid for) suggest I wanted that loan for a while.

So my advice is plan on buying a point or two. It should cushion the
psychology if the market goes lower.

No way I would refinance until normal rates were below 5.25% for the
first... and the longer I wait the more likely I only have the first
mortgage, as the second will be paid off soon. Then I can also change
the 30 yr fixed to a 15 yr fixed. If that's where rates are now, then
I better start paying closer attention.

Before I go any further, I have to come clean. I fully realize that
I'm about to ask how to time the market. But surely there must be
conventional wisdom here.

My wife and I bought our house in 2005 with 10% down, 80% mortgage and
10% home equity loan. The mortgage is 30-year at 5.375% and the home
equity loan is 20-year at 6.125% (but with somewhat unusual
amortization). All things considered, this is a pretty good
situation. However, I can't help but notice that interest rates for
15-year mortgages are flirting with 5% and they look like they're
headed lower.

So I worked up a spreadsheet assuming some current rates from Navy
Federal (4.625% interest rate with $10K in closing costs). It looks
like we can break even in less than 3 years which is pretty good. But
I can't shake the feeling that, if we just wait a few more months, we
can get an even better deal. At this point, it appears all but
certain that the Federal Reserve will cut interest rates at the end of
the month. That doesn't directly affect mortgage rates, but I think
they're somewhat correlated.

This leads to the question: When do you pull the trigger? Honestly,
I'd be content with the current rates. We'll definitely be in the
house for 3 more years so that's not an issue. But I don't want to be
kicking myself 6 months down the road if rates have dropped another
1/2%. Are there signs to look for that rates have bottomed out? I'd
appreciate any advice you can offer me.

Thanks in advance,
Bill Woessner