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Home Loan / Refi Question

S.D. Ice Angular


I am trying to save some money with a better interest rate on my loans.

I own my home free and clear, I currently “DO NOT” have a home mortgage but I do have a “Home Equity Line of Credit” against my home. It is at 6.37% with a $15,500 balance. I also have a boat loan that is at 4.74% with a balance (payoff) of $4,500. My home is not much but it is a place to hang my hat, it is valued at $43,000. I hear on the radio and TV all the time about the super low interest rates on home mortgages right now.

So how can I buy my home from myself with a 5 year ARM at less then 2% and pay off my boat and home equity balance?

I see all the signs on banks and radio ads even ads on this site about no cost refinancing of your home. Is this something I could qualify for? My credit score is perfect so that is not an issue or concern. I have no other loans or credit card debt. I would like to keep some sort home equity line of credit for emergency reasons.

Any advice is appreciated…

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I personally don't think it is ever wise to get a mortgage on their home to payoff consumer credit unless it is to avoid bankruptcy. The savings you might realize is not that much if you put the numbers to it. Mortgages with no closing costs is a sham as it depends on what the bank or mortgage calls closing costs. I've been down this road. At a minimum you will have to pay for a appraisal especially if you do not have an existing mortgage. Then there are deed registration costs and a whole bunch of legal paperwork they will decide is not a closing cost. If your house is worth $43K my bet would be the best you could do would be 75% of that and not at the premium rate. I would leave everything the same and concentrate on paying the boat off. Then use that money to add to the payment of the home equity loan and pay it off that way. Don't add anymore to it.

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A five year arm is a terrible idea. If you do this at least get a 10 year fixed and pay it off early if you want to.

But if you can pay the 20k plus interest in 5 years you probably wouldn't save anything because closing costs and paperwork fees will eat up the costs. Or maybe you would, see below.

It is possible, and it would be worth talking to them about, that you could re-negotiate or roll over the home equity loan to a lower rate.

At the bank I use I see this rate on a 5 year home equity loan

60 payments of $19.41 per $1,000 borrowed 5.55% APR

Or they have the home equity LOC at 4% but that is variable.

Payment is 1.5% of the balance.

On the other hand, a 10 year fixed rate is at 2.625% with a 1 percent origination fee, and then there would be an appraisal etc. but since you are saving like 4 percent on the 15k, that is 600 per year.

If you owed more, it would be an easier call.

If your home equity loan now has a variable rate, upon reflection I would jump on the 10 year fixed unless the closing costs are outrageous.

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The idea behind "no closing cost" refinances is to give a consumer a higher rate which will offset the closing costs. Essentially what happens is that you'll receive a credit for getting a higher rate in order to pay closing costs and lender origination fees. The opposite of this is called a discount which means you'll have to actually pay in to get a lower rate.

It wouldn't hurt to look into it but stay away from any arms and go fixed with how crazy low rates are right now.

I'd also check with your local bank and see what they offer in terms of obtaining an unsecured loan for $20,000. They might not be able to offer a long term loan over 6 years but you'd probably save a considerable amount over the lift of the loan. Going this route the application fees for a basic unsecured loan are probably $100 or less which is much lower than the thousands you'll pay when getting a mortgage.

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If you bank at a small bank, they may bend the rules for you.

I went in and wanted a $40,000 operating loan for my business.

I own the house next door to me as a rental free and clear. It's valued a fair amount more than yours, but they put it on a collateral without pulling a mortgage on the property.

It cost me about $400 for the loan, but better than the $4k in closing costs.

I don't technically have a traditional mortgage on the property, but the property is up for grabs if I don't pay the loan.

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