Is consolidating my first and second mortgage line of credit a good idea?

Here’s the scenario…then I’ll answer…

“I owe on my first mortgage $77,000.00 at a fixed rate of 5.25% ( it was a 15 year loan, Monthly payments of $1,180.00 I have around 8 years left to pay ). I also have a equity line of $100,000.00, I used $98,000.00 at a variable rate of 6% now, with a interest only payment of $450.00 a month. I am also 50 years old. My question is, would I be smart in combining both mortgages into one 30 year fix at 5.8% now before it goes up? I’m trying to figure out my best plan of action. I want to reduce out going monies and start paying interest on the $98,000.00. I owe. I need to know if this is a good idea or keep things like it is. “

No, I don’t think consolidating is a great idea and here’s why…

You’ve got a great rate and are just getting to the point where greater amounts of principal are being reduced on the first mortgage. Refinancing the first mortgage is taking steps backwards.

I do agree the second mortgage line of credit with it’s adjustable rate needs to go…but consolidating the two loans into one is not the answer.

You mentioned the goal was to start paying principal on the second, so simply refinance your line of credit into a fixed rate fixed term second mortgage. Fight for a fixed rate, a set term – 20 or 30 years – and no balloon if possible.

You also mentioned a desire to lower your monthly outflow…well you’ve got too many opposing wants…and one of them has to give.

The smart one to let go off is cutting your monthly outflow…do that in other lifestyle areas…not here.

You are almost to the finish line on the first mortgage…hang in there. Eight years and that payment is gone for good and with retirement around the corner, you need it gone. Then you can focus on liquidating the second early as well.

Good Luck!

Author: The Mortgage Insider

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