Refinancing, I need advise

[pammy]

I need the good, the bad, and definitely the ugly! Anyone go this route on their mortgage?

What I owe on my home = $65,400
What it's worth = $120,000 easy, probably more (was appraised for over 100k before we bought it, remodeled and built shop)
What other debts I have = less than $50,000 (if I included student loan, may not if the new mortgage rates are higher than what my student loan has now, it's $19,000 @ 5.5%)

Here's why I'm considering this: Rates are cheap right now. We don't have too many debts, but the ones we do are larger with big interest rates (car at 10%, rv at 11%). I still cannot find dd a car, and she loves mine. If I kept the one I owe on I could sell her my older one (she has the cash for it for what I paid for it). I know it's a good car, not one lick of trouble these past few months, solid car. I know my other one I owe for is an almost new car with very low miles I could keep for a very long time. The rv would be paid off and I wouldn't need to carry full coverage insurance for it, needless since it sits in the driveway 330 days of the year, at least.

If we included our debts with the mortgage in the refinancing it would untie between $1,000-$1,200 a month (depending on student loan) for the bigger payment. Would only need to make one payment.

We finally have our heads on straight, I think. If we did go this route and decide to sell our expensive car and rv we can take that money and buy an older used model and apply the leftover to the principal on the mortgage.

Since we'd be able to make a much bigger payment we could check into setting it up for less years than we owe now (we mortgaged 25 years last year) and maybe a fixed rate instead of a variable rate, which is what we have now.

And since I've got all of this out there, we have our mortgage at our local bank. If you think I should check into refinancing our home to include some debts would you keep it local with who we trust, or is there a good mortgage company out there?

And please, if you've done this before and have some advise, good or bad, please get it on here, I'm open to everything. Thanks!!

[Kimberlina]

We are just in the end stages of doing basically the same thing with a home equity loan. Our house is currently appraising at about $55k more than we paid for it, and we bought it 4.5 years ago. We initially had a 20 year mortgage, and we refinanced (for a lower rate ONLY, we did not roll anything into it) 3 years ago. At that time, we shortened our loan to 15 years, and have about 11 left because we pay extra to the principle every month.

We have our mortgage with our local bank. We had it with them even before we refinanced, because they gave us the best rate. They are also giving us the best rate on the HE loan. We did those bankrate and lending tree deals where they claim banks compete for your business. Our local bank is still giving us the best deal, and we can often get them to waive fees. I think we are getting a rate of around 6%. (We are closing sometime this week, I think.)

This is just a matter of transferring debt, really, and you have to be careful with it. Whereas most other debts are unsecured like credit cards, or where you will only lose a car if you don't pay, with things rolled into your mortgage or a HE loan, you are putting your house on the line. So the thing you really need to ask yourself is- so you ALWAYS pay your bills on time? Is there a chance you could lose your house? Of course, any one of us could get into a car accident tomorrow and be unable to work and not be able to pay for our house, but I'm just saying it is something you need to think about.

The next thing is coming up with a solid plan to keep yourself from getting back into the debt in the first place. If the debt is just something like a student loan (which you mentioned) well, you're not likely to keep accruing that kind of debt unless you are a professional student, lol. But the credit cards need to go. Our bank actually requires us to turn the card physically over to them at closing, which is fine with me.

Write up a feasible post-"loan" budget. You will have lots of "extra" money every month that won't be going toward high interest. Once you have a small emergency fund (Dave Ramsey recommends $1000 to start) then put every available penny toward your debt. Dave says to pay off the smallest first as it gives you a feeling af accomplishment, but if you roll most of your debts into that re-fi, you should probably just put it toward the highest interest debt. If you roll EVERYTHING into it, that won't be an issue. And then you will have a little "wiggle room" to indulge once in a while or pay for an emergency. (Speaking of which, another Dave-ism is that once everything except the mortgage is paid off, you THEN expand your emergency fund to cover 3-6 months worth of expenses.)

We will have about $500 "extra" every month, and once we have things in order, in a month or two, we will be putting part of it toward the home equity loan (probably about $350 extra a month) and about $150 extra toward the mortgage. By doing this, we will have the HE loan paid off in less than 1/3 of the original loan period, and our house will be paid off in less than 10 years. Not bad considering our income.

Then we can start putting a LOT more into retirement and our DDs college fund.

I would DEFINITELY get away from that variable rate mortgage. Rates last summer/spring were the lowest they have been in 40 years. I don't know what they are now, but they are still pretty low, I'm sure, so I would go for it if I were in the same position.

Well, I've certainly rambled. Good luck with whatever you decide.

[pammy]

No cc debts, and I don't like them, never have. No worries there. We already have our $1000 EF in place. And we're saving 10% after-tax money towards retirement.

If we did do this the only debt we would have would be have is mortgage. If that were the case, we'd definitely up the EF to cover 3-6 months living expenses. The debts we'd be rolling in would be from the same bank we have our current mortgage with, except for the student loan (and nope, no a professional student, lol I'm done.).

So a HE loan is a seperate loan, correct? Is that considered a second mortgage? I'd definitely want less years, and definitely a locked in rate over the variable I have now. But I'd like more for it all to be one loan, not two. Does that exist, and if so, what's that called? I'm still kinda ansy when it comes to the places over the net, I feel most of them are just out for your money, ya know? I'd feel safer knowing the place that holds my mortgage is housed in an actual building I can see and I can talk to a real person about my loan. So I'm leaning more towards my bank.

[RuthNY]

I don't know, I think that if being debt free is where you are striving to be I think you ought to just sell the car and the rv and refi the house at a lower fixed mortgage. You could have European vacations at the cost of that rv. Step out of the box you are in and think about that for a minute. (It's hard to express yourself online...I don't mean any bossiness if it's coming out that way). I just really think that's a lot of money geared towards vacations.
If you refi just your mortgage at a good fixed rate you could really come out ahead.

[lacyj]

You can always rent an RV, and probably for the cost of a motel room, a day. But you get the kitchen and can stop and rest anytime...

[celina]

sell the rv is my vote...i dont know enough about cars.....but i know i rent a cottage for 700/week in the summer...and it comes out to a way better deal ......for a month....i'd likely get it for under 2500...you'd be better off in the long run, ive condolidated 3 times and it never solved the problems for us

[pammy]

The new car is up for sale, think I'm just really frustrated. It's been over 2 months now and I haven't heard a word yet from the car lot that's selling it for me. Yet, I'm still making the almost $500 a month payments and paying the full coverage insurance on it monthly. I'm so anxious to be done with that payment, I think I'm looking at anything. I like my used paid-for car that I drive now. Think we'll just keep looking for dd a used car until we find her one.

I so hear you all on the rv, and agree completely. If I did sell it I could pay off the loan, and may have some left over (though this is December and not the selling season, who knows). It's costing me almost $400 monthly. The problem is no one around me wants to let me sell it. Me and dh finally did agree a few months back that 'come Christmas' if we weren't able to pay it off then we would sell it. Every time I bring that up he backs up. I have no idea what is holding him to this thing, truly. This is a person who doesn't want to have anything to do with the finances, whatever I decide is fine. But he puts his foot down on this one thing. Rare. I need to delve deeper into that from him, figure out what's the hold up.

So saying, if we did finally sell the newer car and decided to sell the rv, then really all that would be left is my mortgage and my student loan. There really isn't a need for refinancing, unless it's for a better rate. And the majority of you guys think it's a no-go for paying off debts. Hopefully the other two debts will work itself out soon (before I go nuts! lol). If I do manage to sell the newer car and dh is still stubborn on the rv I could apply the car amount to that loan and have it paid within the year, if it really means that much to him. Or vice versa, sell the rv and pay down the newer car until it finally sells. Both loans = gone.

I think what's getting to me is that we didn't have any small debts to start working on, and I'm doing all of this and not seeing any results yet.

[Lucky Star]

I already replied to your other thread, but also wanted to say a couple of things here, which hopefully you'll find helpful. I think you have gotten a lot of very good advice on this thread, so I'm not going to repeat any of it. The bottom line is that if you roll your debts into your mortgage or a HE loan, it may be an easy solution, but it might not change the underlying behaviors. You may find yourself in the same situation a few years later, but now with bigger mortgage payments! I understand that the high interest rates can be quite painful, but by locking them into your mortgage, even at a lower rate, you are actually extending the term of your loan to 15, or 20, or 30 years. So in the end, you may end up paying even more in interest, even at lower rate! (Hope that makes sense).

Since it sounds like both your car and rv are non-essential, you should sell them ASAP. Even if it means cutting the price on your car. If it hasn't sold for a couple of months, maybe the price is too high? As for the rv, you'll need to sit down and have an honest conversation with your DH. I can relate b/c in our relationship my DH is definitely not the frugal one, but he's really come around since we started on our plan. The key is to be honest with him and lay it all out in the open: how much you owe, how much your payments are, and what your budget looks like. I know it's a tough one - but hopefully once he feels that he is part of the "team" and that his opinion counts in the final decision, he may come to see things as they really are and get on the same page with you.

Finally, I see that you are putting 10% of your after-tax income into retirement savings. You may want to put that on hold until your debts are paid off. Trying to save while paying off debts is like trying to row a boat in different directions - you just end up going in circles! After-tax money in particular gives you very little benefit. Just think about it: if you were to use this money to pay down your debts, you would automatically be making 10% "interest". It's unlikely that your retirement savings are earning that much for you now.

Hope this helps, and good luck!

[celina]

the above poster made some awesome comment about using the retirement moeny towards debts eraning an auto 10% interest...

also regarding dh and the rv..is it an appearance thing....if you sold it, people would ask why.....and maybe he doesnt want to feel like you couldnt afford it...

BUT most people will take the answer of...." tired of financing stuff....simplifying...." gladly and with great understanding....


good luck, im luck dh is on same page as me....