Second Mortgage Shop

We bought our house in 2004 for $54K and have a 30 year fixed mortgage at 5.25%. Our balance on our mortgage is $47,500 Our house has appreciated and is now worth about $100K. We have student loans totaling $16K and credit card debt of about $10K. No car loans. We're expecting a tax return of about $4,500. We'd also like to add on another room to our house and have a quote for $7,500. We'd like to refinance for about $80-$85K. With interest rates getting back down to the mid to low 5% is it a better deal to refinance or get a second mortgage?

Thanks in advance.
My husband and I both have excellent credit.

Refi, w/o a doubt. Second mortgages tie you option-wise for down the road. You're in good shape here.

I'd refinance, pay off the debt put the room addition on, and you're sitting pretty.

Plus, based on having excellent credit, stress excellent credit, you're rate will close to the same as it currently is.

Nice job!

Get in touch with me if you want to talk about specific rates.

I apply online and I am offered something called: Rate 5.875% and APR (Annual Percentage Rate) 7.034% which one is "the one" or how they work. How can I calculate my monthly payment, taking into account the first one or the second one? Thank you for your help.

Be careful here - it is a requirement to give you both of these rates for the following reasons:

The rate is the real rate of your loan. While it look wonderful, the APR rate is the effective interest rate for the first year based upon the additional pre-paid points you are paying.

Closing costs include some lender fees and other items. The lender fees are free pre-paid interest to the lender. They are tacked onto the closing and that is why the APR is so high for the first year.

If this is what you truly want, then what you are actually doing is called "buying" down your rate. In other words, you are paying pre-paid up front additional fees to get a lower interest rate over the course of the whole loan.

Make sure you check out both rates when you shop for mortgages and get the one that gives the best of both.

PS — Your monthly payment will be based upon the 5.875 interest rate + any escrow if you let them do escrow + any PMI if you have that as well.

Good luck.

I have a rental property that I took out a Heloc on and the rate for the Heloc is much lower then the rate I have for the second mortgage on my primary home. If I use the Heloc that is on my rental property to pay off the second mortgage on my primary home can I still write off the interest on my taxes.

Absolutely

It would be considered an expense of the rental property so first if the additional interest creates a loss in your rental be sure you are able to deduct that loss.

Rental losses are considered passive and there are limitations on deducting passive losses.

After a lifetime (30 years, anyway) of stellar credit, I was forced to file Chapter 7 about one and a half years ago. My manufacturing business failed primarily due to cheaper offshore product being imported into the USA. The total debt liquidated was probably in the $60K range, the majority of it business related. I did reaffirm my first and second mortgages on my home, along with a line of credit at a local bank, and two vehicle loans, with all payments being made on time every month. My situation now is that I have sold my home and am scheduled to close in two weeks. This will clear all debts and leave me with around $60 in the bank. I am currently shopping for another house and am curious about what mortgages are available, and what type of interest rates should I expect, and if I can even qualify for a loan. My income is $70K per year.

i dont' think you can do anything for seven years. honestly, i wouldn't loan you any money.

You can always shop around as much as you want; you are a consumer and you have the right to do business with whomever you want! Credit Unions and commercial banks are always looking for good people to lend money to. There are web-based companies that shop for you then get a commission if you do business with the firms they recommend. You have many options! Keep in mind that credit is very tight right now and without strong credit scores you’ll be offered higher rates on loans and in some cases, with low scores, no offers at all.