Wondering asked:
Yesterday our mortgage lender called to give us details on a possible refinance opportunity. We aren’t sure if we want to do this or not. Would you look at the facts and figures and give us your opinion?
Right now we have a 5.875% 30 year fixed rate loan with a balance of $134,700. Our monthly payment is $1,113.87. This includes insurance and taxes.
We can get a refinance at 5.625% 30 year fixed rate for $161,000. Our monthly payment will be $1,250.
Another option is to take a 15 year fixed rate at 5.25% with a monthly payment of $1,611.
Both of these options will be 90% of our home value and will then incur mortgage insurance until our balance drops below the 90 % value of the home.
We would get a cash out of $34,000 to pay off credit card debts. These credit card debits are at a low 2.99%, 3.99% and 4.99% fixed life of loan rate. We have been paying off about $700 to $1000 a month on this debt. In the last year, we paid off about $12,000, bringing the debt down from $36,000 to $24,000. This is the only debt we have, other than the mortgage.
Here’s the question: Should we continue to pay off the credit card debt and be done with it in about two years? Of course, this is assuming that there are no other emergencies that require us to charge more debt. I am wary of the credit card market being able to change your percentages without much reason. We have co-signed for a car for a family member and she often makes late payments. I understand the credit card mongers can change your contract if you are delinquent on any bill, not just their own bills. That would be bad.
It would be lovely to have only one mortgage bill to pay instead of five credit card bills and one mortgage payment. And not to worry that the terms might change without much warning. Plus it would all be a tax break.
On the other hand, we could be done with that $34,000 credit card debt in two years if all goes well. Then we could double up on our mortgage payment and get that paid off sooner.
What do you think? What would you do if it was your choice? We are going to ask our accountant friend the same questions. Just gathering opinions now. Thanks for taking the time to help us think this one through. We will be anxiously awaiting your answers!
SALVATORE
