Refinance mortgage with a home equity loan?

Edwards Finance > Refinance

Q. Today I visited a bank to inquire about refinancing my mortgage. The mortgage has about 17 years to run, has a current principal of over $120,000, and pays interest at 7-1/8%. The bank officer offered me a home equity loan at 6% to pay off the mortgage. The rate is higher than for a conventional fixed mortgage, but we would save on fees. (I have heard that this bank's mortgage division is rather rapacious when it comes to mortgage fees. Is there a bank that is not?) We already have a home equity loan outstanding, but it leaves us enough equity to pay off the mortgage. The new home equity loan would run for 20 years and would accept overpayments. Purely on arithmetical grounds, I doubt that a home equity loan is a better deal for me, but I'd like to hear from others.

A. It's gonna be close. A lot depends on how long you're in the current house. If you assume the "average" move/refinance time (7 years) it gives a different sort of tradeoff than if you assume you'll be there for the life of the loan. You may want to check into mortgage brokers, either local or internet ( www.loansatwholesale.com , or shop the rates at www.bankrate.com ) . Banks tend to run on the high side when it comes to refinancing fees.

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