In my effort to continually manage money smarter, I could use some advice. I currently pay 6.09% on a 20-year Home Equity Loan (WAMU), but just received a brochure (HFCU) to get it down to 5.74% fixed. I then went online and now I'm really confused. There are a ton of options and not a very good explanation on choosing one over the other. I'm on a single income, trying to pay my son's college expenses and soon it is going to get really expensive. I'm trying to plan ahead a little. My current monthly payment is 930.38 (120k remaining). I've seen options to get it much lower, but get lost in the detail. The feedback I'm interested in is what you would consider the best option at this moment.
Your post is a tad bit confusing (or perhaps not). You say you have a 20 year home EQUITY loan. Is this in addition to your mortgage, or do you own your home outright and have opened an equity line of credit against it?
I've never refinanced my home (I have a good fixed interest rate) but I recently used Lendingtree to refinance my car. I got 5 offers with 5 different interest rates. I picked the lowest one and moved on it. Only bad thing about Lending tree is that you get tons of calls from the 4 institutions that you turn down trying to change your mind.
My house payment is a single 20-year equity loan divided into monthly payments. I owe 120k on this loan and the monthly payments are 930.38 at 6.09%.
841.82 is what mortgage calculator says you pay for 120k at 5.74%. Do they charge you refinance fees?
Usually an "equity" loan is taken out against the accrued equity in your home (House value - amount owed) and is an additional lien against your home unless you own your home free and clear. There are still some unknowns, that would impact the decision. How much is your house worth? How long is left on your loan? My first impulse would be to look into student loans for the college expenses. They are generally at a reasonable interest rate and don't become due until 6 months after graduation (or non-attendance). This would allow me to continue paying my home loan and accruing additional equity. When the student loans become due then I would investigate my loan options. The major drawback about using the above is the interest rate uncertainty X years in the future. For now, 6% is pretty good and there is no guarantee what the rate would be after your son graduates.
Which site did you use for that? Can you do it in reverse? For instance; I need a few home improvements. If I lowered my payments to 900, how much would the bank pay back (120k + n = total loan which is then calculated down to 900 per month). A little algebra.
The times we have refinanced our house to pull out equity, we have used a 5 or 7 year balloon note with an adjustable rate. This has worked out very well and the 5 or 7 year ARM generally gives you a better interest rate. Another decision to weigh is closing costs. Go to www.ingdirect.com and see if you can access their mortgage page. They advertise really good deals on closing costs and their web site will show you some typical fees vs. what they would charge. This will give you some ideas as to what fees mortgage companies will charge. Another thing to do is to go to Lendingtree.com. You will get 5 offers within a day or two and the one time I used the site for informational purposes, all of the companies who made an offer were very good about leaving me alone once I told them I was not interested. One lender gave me a follow-up phone call a few months down the road (at my request) and then left me alone after I told her I was no longer interested.
Your Monthly Payment for 20 Years for an Interest Rate of 5.740 % on a Loan Amount of $ 128,500.00: $ 901.44 a Month http://www.mortgage-calc.com/mortgage/simple_results.php
Unless you want to take cash out at closing or have more principle to put in, I don't think its worth saving an extra 0.30%. Add to that refinance fees also. The first few years of a loan is all interest so you'll be back to where you started.
I don't think you have a home equity loan. I think you have a standard home mortgage loan. A home equity loan is something you take out in addition to your mortgage (once you've built up equity.) Unless your house is completely paid for, I doubt you have $120,000 in equity. I could be wrong though.
Maybe I'm missing something, but are you asking about trying to get more debt to pay for your son's college tuition...If yes, then do it... Otherwise, I'd say no as I can't remember off the top of my head, but with refinancing costs, etc, I thought the break-even point was at least 1% drop in interest rate before you consider refinancing...
I was about to say, you should be able to find a cost-free option, or at a minimum go to your current lender and tell him you are going to refinance and he can do it for you for free, or lose the loan. The downside, that I see, is that you probably don't want to be re-financing your loan all the time, especially shortly after taking it out in the first place - which I'm guessing you might have done. Rates may go back up, or could continue to drop some more...see if you can get a little more color on that first. It may make sense to wait a couple of more months, half a year, something like that...who knows?
