Consumption and Real Estate
Is refinance or second mortgage a better option (specifics in details)?
Question : Is refinance or second mortgage a better option (specifics in details)?
We bought our house in 2004 for $ 54K and have a 30 year fixed mortgage at 5.25%. Our balance on our mortgage is $ 47,500 Our house has appreciated and is now worth about $ 100K. We have student loans totaling $ 16K and credit card debt of about $ 10K. No car loans. We’re expecting a tax return of about $ 4,500. We’d also like to add on another room to our house and have a quote for $ 7,500. We’d like to refinance for about $ 80-$ 85K. With interest rates getting back down to the mid to low 5% is it a better deal to refinance or get a second mortgage?
Thanks in advance.
My husband and I both have excellent credit.
refinance second mortgage
Best answer:
Answer by Luke 6:37
Refi, 2nd morts suck because they usually have higher rates. You will get a better rate on the refi.
I would wait until the summer to refinance though. We won’t see these rate cuts for at least that long. If you can hold out I would until then.
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#2 written by americannationwidemtg 1 year ago
Refi, w/o a doubt. Second mortgages tie you option-wise for down the road. You’re in good shape here.
I’d refinance, pay off the debt put the room addition on, and you’re sitting pretty.
Plus, based on having excellent credit, stress excellent credit, you’re rate will close to the same as it currently is.
Nice job!
Get in touch with me if you want to talk about specific rates.
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#3 written by Matt K 1 year ago
Based solely on those two options, you are better refinancing assuming your house will appraise for at least 100k.
However, here’s another thought for you. Why don’t you immediately discontinue usage of your credit cards and aggressively pay down that debt instead of putting another room onto your house and sucking equity out of your house…effectively using your house as an ATM?
I’m not trying to be a jerk, but if you are actually looking for the best decision money wise, then pay down that credit card debt. When you have 16k in student loan debt and another 10k in credit card debt, it really is not the time to suck equity from your home to add an addition.
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How steady are your incomes? Your payments should be pretty comfortable at this time.
Paying off your credit cards has the advantge of saving interest costs which I assume you itemize and deduct. But it reduces future credit because you no longer have credit.
Your student loans are similarly two sided.
What is your intent behind your room add-on. In this real estate market it will not likely increase market value. If it is not for a kitchen upgrade or bathroom, it will not add significant value in any case.
What is the rental value for your home and what is your rental market strength. In this market, you may be better off by renting your home and buying another with little or nothing down, including a foreclosure, whose bank might even provide you money at closing to make repairs or improvements simply to get the property off the books.
ALL DEPENDS UPON THE STABILITY OF CURRENT INCOME. Few jobs are forever, including government careers.
You are likely at a point of your lives where you can take a little risk. Present market conditions encourage that provided there existing no income loss risks.
Even with the recent change of Fed Fund rate, a 5.25 30 yr loan will be hard to match. I would keep it and look for a second T.D. for the amount of money needed. The blended costs will minimize loan and transaction costs.