refinancing question related to the dropping interest rates?
How do you go about it?
We’ve lived in our home approx. 18 mos. The mortgage we took out was an 80/20… which means 80 % mortgage, and 20% home equity. So the mortgage is a fixed 30 yrs @ 6.5 %; however, the equity is a variable 15yr at about 7.25% right now.
Is it possible to refinance, at least the variable rate. Is it worth it to try a refinance or will it not make much of a difference, and does refinancing affect your credit in any way? I don’t want to ruin my credit. Thanks
February 7th, 2010 at 9:11 pm
If the fed drops the rate, home equity lines, credit cards, car loans, and other short term interest rates fall as well. If you have a varible, your next bill should reflect the lower interest rate. You don’t have a bad rate (many people have 10 &11% equity lines)
February 7th, 2010 at 9:11 pm
Hang tight. While the Fed has dropped substantially in the last few weeks, it is going to take some time for this drop to reflect in fixed mortgage interest rates. Long term fixed rates are more closely tied to Treasuries and Bonds, and these take a month or more to react to Fed drops.
Keep your eye on fixed mortgage rates over the next month or so, and prepare in advance to lock an attractive rate as soon as one crops up !
February 7th, 2010 at 9:11 pm
I would refi to one mortgage with a fixed rate around 6% if your credit,income are good
February 7th, 2010 at 9:11 pm
Your 80/20 implies you put nothing down. 18 mos later, you probably don’t have much, if any, equity due to falling home values.
While it would be nice to get one of those sub 6% refi’s, your total LTV might not help you. Keep the 1st mortgage at 6.5, refi the 2nd into a fixed rate HEL, if possible.
February 7th, 2010 at 9:11 pm
First even though the government dropped the rates, that has no effect on your ARM, that is tied to the LIBOR rate, which although has dropped a little, but not dramatically. Next you basically financed 100% of you mortgage 18 months ago, said to say but your home is most likely not worth as much as you owe on it, and that is going to get worse during the next 12-18 months as more, and more homes go into foreclosure, thus flooding the market (supply and demand) thus lowering prices. This coupled with the tightening of credit availability thus leaving less buyers on the market tends to put more pressure on the lowering of prices on homes. Check to see what similiar homes are selling for in your area, and how long they have been on the market (an indication if priced too high) compare that to what you owe, plus the additional charges that might apply to see if this is not only possible but viable.