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Financial guys here - what to do with variable interest rate home equity line?

K

Kremlar

Golden Member
Have a home I purchased in January of last year, then refinanced 6 months later for a better rate.

I'm currently sitting on a $350K or so 5.5% mortgage, plus a $37K or so home equity with a variable interest, 8.25% this last statement.

My goal was to pay off the equity line as quickly as possible, but it's been slower than expected because we're getting married this year, plus various other house expenses.

Interest only for this line is $250 or so per month. I've been dumping a minimum of $500, but usually closer to $800 into it each month.

Between paying for the weeding and dumping cash into my 401K, I can't see myself being able to take a big chunk out of this until at least this time next year.

Watching the equity line interest rate go up is killing me.

Is there anything reasonable to do with it right now?

Is it reasonable to refinance just the home equity line to a fixed rate? If so, other than local banks, where is best to look? What type of loan should I go for?

Does it make sense to dump it onto a couple low-interest credit cards and pay it from there?
 
8.25% is NOT a bad rate to have for an equity loan. Your balance is only 37K so a higher rate on that small of a 2nd mortgage doesn't make that large of a difference. You are already paying well over the required minimum payment which saves you a significant amount of interest just by doing that. Keep it as is. Refinancing will not help you at this point.
 
Originally posted by: Slew Foot
Multiply by 5 million people nationwide and you have the beginnings of the housing bubble exploding.
Click to expand...

Sitting on the sidelines waiting for the Feds next rate hike! You know those with HELOC's are sweating when their local bank is offering 5.6 - 5.8% 1yr CD's to investors!!!






 
HELOC's are usually index'ed on the Prime Rate plus a margin. At 8.25%, yours is Prime+0%, which is an excellent rate for that type of the loan. It would be unlikely that you would get anything better as a fixed 2nd at this time, you don't want to refi your low rate 1st, and -- as the Fed is likely to stop raising rates soon -- the rate on your HELOC is probably not going to go much higher. Plus, HELOC's provide excellent flexibility as far as payments, are a credit line that can be borrowed against should you need to, and the interest is tax-deductible (unlike those credit cards). Leave it alone.
 
Originally posted by: Slew Foot
Multiply by 5 million people nationwide and you have the beginnings of the housing bubble exploding.
Click to expand...
How so? His concern is not about not making his payments and losing his house, but that he is not paying it down as fast as he would like to.
 
Multiply by 5 million people nationwide and you have the beginnings of the housing bubble exploding.
Click to expand...

Yeah, they've been saying that since I bought my first home in 2001. Sure glad I didn't wait for this bubble to burst! I don't see a bubble (at least not around here in MA), but a gradual slowdown - which had to happen eventually.

Trim your lifestyle and put more against the loan. Weddings don't have to cost much.
Click to expand...

Wasn't my question, but thanks for the advice. LOL


HELOC's are usually index'ed on the Prime Rate plus a margin. At 8.25%, yours is Prime+0%, which is an excellent rate for that type of the loan. It would be unlikely that you would get anything better as a fixed 2nd at this time, you don't want to refi your low rate 1st, and -- as the Fed is likely to stop raising rates soon -- the rate on your HELOC is probably not going to go much higher. Plus, HELOC's provide excellent flexibility as far as payments, are a credit line that can be borrowed against should you need to, and the interest is tax-deductible (unlike those credit cards). Leave it alone.
Click to expand...

I think it may be prime + .25%, but hasn't shown the latest bump yet.

I didn't think there were many legit options right now, but figured I'd throw the question out there. Thanks!!
 
I am a mtg loan officer for a fortune 200 company. I would just leave it the way you are. Right now the prime rate for a 30year mtg is about 6.3%. 6.3 is what the banks and lenders are able to get the from the fed, then most companies will have a base rate for 6.5. You wont get any normal mtg for lower rate then right now. I would just pay more down on the HELOC when you have more cash and get that sucker done with.


Or you can check this out.
http://www.bankrate.com/brm/news/loan/20060713a1.asp
 
Leave it in the HELOC.

Pay it down as fast as you can even if it means that you will incur prepayment penalty.

You will probably save more on the prepayment penalty versus interest plus annual maintenance fees.
 
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