topic Re: ReFi, HELOC, or Home Equity Loan? in Mortgage Loans

ReFi, HELOC, or Home Equity Loan?

ridgebackpilot — Fri, 27 Jan 2023 14:57:04 GMT

We've owned our current home for 16 years and have built up considerable equity. Never refinanced our original adjustable-rate mortgage.

Home value: $1.375M

1st mortgage balance: $475K

2nd mortgage balance: $230K

Energy efficiency (solar) loans: $100K

I need to pay off the old 2nd mortgage loan, which was downpayment assistance with a former employer. It's a "silent second" so we've never made any payments, and my employer will accept payment of principal with no interest.

What's my best option at this stage? I've considered one of four alternatives:

Refinance our 1st mortgage to pay off the 2nd and solar loans. But interest rates are sky-high...
Take out a Home Equity Loan to pay off the 2nd mortgage and solar loans. Same problem.
Take out a HELOC, but many lenders aren't offering them these days.
Sell the home and pay off all mortgages and lenders, which we really don't want to do.

Not sure what to do at this stage, given that mortgage interest rates are so high. Any advice and counsel welcome!

Re: ReFi, HELOC, or Home Equity Loan?

cashorcharge — Fri, 27 Jan 2023 18:02:02 GMT

I see you've got a NFCU card in your profile...if you decide to go HELOC, check them out. They have some great options. Yes, the APR on a HELOC adjusts...however, working with them was incredilbly easy.

Re: ReFi, HELOC, or Home Equity Loan?

MauiMan85297 — Fri, 27 Jan 2023 19:10:40 GMT

What is the rate on the ARM? We as consumers over the last couple of years have been spoiled by rate and we now think that 6% on a mortgage is super high which is ridiculous. Just 5 years ago as a very large non-bank direct lender we were quoting rates in the high 5's.

If you're waiting for a 3% rate then you're waiting for another pandemic to hit. If I was in your situation I'd combine all 3 into one mortgage, whether that be a 5/1, 7/1 ARM to give you the lowest possible payment then a year from now refinance to that lower fixed rate as you seem not to be alarmed by an adjustable.

Re: ReFi, HELOC, or Home Equity Loan?

iced — Mon, 30 Jan 2023 15:19:16 GMT

@ridgebackpilot wrote:
We've owned our current home for 16 years and have built up considerable equity. Never refinanced our original adjustable-rate mortgage.

Home value: $1.375M
1st mortgage balance: $475K
2nd mortgage balance: $230K
Energy efficiency (solar) loans: $100K

I need to pay off the old 2nd mortgage loan, which was downpayment assistance with a former employer. It's a "silent second" so we've never made any payments, and my employer will accept payment of principal with no interest.

What's my best option at this stage? I've considered one of four alternatives:

Refinance our 1st mortgage to pay off the 2nd and solar loans. But interest rates are sky-high...
Take out a Home Equity Loan to pay off the 2nd mortgage and solar loans. Same problem.
Take out a HELOC, but many lenders aren't offering them these days.
Sell the home and pay off all mortgages and lenders, which we really don't want to do.
Not sure what to do at this stage, given that mortgage interest rates are so high. Any advice and counsel welcome!

If it were me in this situation, I'd do a combination of things that may or may not be available to you as you didn't mention what other assets are at your disposal:

1. Tap into savings to pay down/off the mortgage. While interest rates on savings are going up, if the interest on a loan is higher than the interest on the saved money, I'm still losing money so I'd draw down (except emergency savings) to reduce/eliminate the loan balance.

2. Get a loan via options 2-4 for the remaining balance, if any. I would avoid the initial refi if your current rate is lower than market rates. You don't want to make that $475k principal jump up to a higher interest rate. If it is just as high, roll them into one and consolidate since no loss there.

3. If you have investments, you may only have to eat that loan for a couple years until we pass through this semi-recession and stocks rebound. Once things recover, you can wipe out the remaining balance quickly and not have to carry that loan/mortgage for any longer than is necessary.

In the worst case (no savings), a $230k mortgage is pretty small so even with higher rates the interest isn't all that much in the grand scheme of things.

Re: ReFi, HELOC, or Home Equity Loan?

ShanetheMortgageMan — Wed, 01 Feb 2023 02:14:02 GMT

ARM's, while in the adjustable period, are likely seeing an increase in rate at each adjustment period. Check to see what index your ARM rate is tied to as well as your margin, as together they will equal your actual mortgage rate the next time it adjusts. A lot of ARM's are using the SOFR index which as you can see from https://www.newyorkfed.org/markets/reference-rates/sofr-averages-and-index has been increasing at a healthy clip. That information will help you determine what your interest rate will adjust to.

What is the interest rate on the solar financing? I've seen many at fairly decent rates. If your goal is to keep the solar financing in place then you should ask them about what their subordination requirements are, as if you pay off senior liens (the 1st & 2nd mortgage) your solar company may require a subordination process to occur which involves them approving you taking out a a new 1st or 2nd mortgage (as when your current 1st and/or 2nd mortgage is paid off the solar financing lien may automatically move into that position on title). Some solar finance companies are willing to subordinate with ease, sometimes not even charging to do so... but we've also seen others who refuse to subordinate or make it a costlier process. Don't let their process be a surprise.