Q&A: Refinance or home-equity loan?
We have an adjustable mortgage which is going to go up in October 2008 and want to refinance it before it does. We also have around $25,000 worth of loan and credit card debt that we would like to consolidate in one home equity loan. Both me and my wife have good credit scores, not exceptional, but not bad. What do you recommend we do first? The re-fi or the home equity?
I'll bet other people are weighing their mortgage options right about now, too, so I posed the question to Ethan Ewing, president of California-based Bills.com. His suggestion:
The other caveat: "You've got to have some fiscal discipline," he said. That is, don't roll your debt into your home mortgage if it will just tempt you to run up more debt.
He suggests a 15-year fixed-rate mortgage when people refinance if they can manage it -- because you'll pay off more of the principal sooner -- but a 30-year fixed-rate is fine, too.
Mr. and Mrs. Joe have a year before their rate adjusts. But Ewing thinks they ought to refinance soon, never mind the predictions that the Federal Reserve wants to lower rates further.
"I'll tell you, rates are really low right now," he said. "They shouldn't wait. ... There's just no guarantees that in a year, rates are going to be that low."
Hope that's helpful, Joe.
Got a question -- or other advice for Joe? Comment away.