I'd appreciate the critical opinions of some of the folks who frequent
this newsgroup and are more experienced and savvy than I regarding home
financing.

Currently, I am about 4.5 years into a 7 year balloon mortgage at 5.5%
fixed. I've paid down the premium balance regularly and expect to have
no problem paying it off fully at the end of the 7 year term (in early
2006) without drawing from long-term investments/assets (which would be
available in an "emergency").

I'm considering paying off the mortgage using a Home Equity Line of
Credit. I qualify for one from a reputable source which has zero
application or "closing" or annual fees, an interest rate which is Prime
MINUS 1%, and a draw period of 10 years -- though, as with the current
mortgage, I plan and expect to have the balance paid off by early 2006.

Of course the variable interest rate of the HELOC is what I am concerned
about. I've looked at the way the Prime has varied in the past (went
back about 50 years) and have found some years (esp late 70's and early
80's) in which it changed, both + and -, A LOT! For example, 1980 it
INCREASED a net of 6.25% during the year. Though the economic and
political environment now is different than late-70s-early-80s, the fact
that the Prime now has virtually nowhere to go but up is a "concern".

I do like the additional flexibility (minimum payment possible and 10
year draw period) offered by the HELOC in case of emergency vs. the
balloon though, as I said, I think the NECESSITY (vs convenience) of
that is pretty unlikely. But nothing's impossible. ;-)

Anyway, I'd truly appreciate hearing pros/cons, cautions, whatever from
folks with experience in home financing.

TIA

BTW, I've checked into fixed interest options but haven't found one that
offerred enough difference from my current mortgage to make it
attractive.

With only 3 years left on the loan why are you considering refinancing
at all?

(D. Gerasimatos) wrote in message ...
In article ,
Bill Seurer Bill_AT_seurer.net wrote:

With only 3 years left on the loan why are you considering refinancing
at all?


I agree. The real struggle will be paying the balloon. If you can do that
then don't worry about it unless the amount financed is very large (and
hence the interest savings is large).

Agree. The OP said paying the balloon payment in 2006 was no problem,
so I'd just plan to do that, not get into a new mortgage.

If the OP can make extra payments now, that should save money by
reducing the amount of money spent on interest. I assume that would
also make the balloon payment smaller also.

What would I do? Pay extra on the existing mortgage at every chance,
then pay off the balloon payment in 2006, and have no mortgage at all.

The home-equity line of credit has another problem for me: it'll be
tempting to use it pay for other things, thus increasing the debt and
making it harder to get out of debt.

Ermalina wrote:

I'd appreciate the critical opinions of some of the folks who frequent
this newsgroup and are more experienced and savvy than I regarding home
financing.

Currently, I am about 4.5 years into a 7 year balloon mortgage at 5.5%
fixed. I've paid down the premium balance regularly and expect to have
no problem paying it off fully at the end of the 7 year term (in early
2006) without drawing from long-term investments/assets (which would be
available in an "emergency").

I'm considering paying off the mortgage using a Home Equity Line of
Credit. I qualify for one from a reputable source which has zero
application or "closing" or annual fees, an interest rate which is Prime
MINUS 1%, and a draw period of 10 years -- though, as with the current
mortgage, I plan and expect to have the balance paid off by early 2006.

Of course the variable interest rate of the HELOC is what I am concerned
about. I've looked at the way the Prime has varied in the past (went
back about 50 years) and have found some years (esp late 70's and early
80's) in which it changed, both + and -, A LOT! For example, 1980 it
INCREASED a net of 6.25% during the year. Though the economic and
political environment now is different than late-70s-early-80s, the fact
that the Prime now has virtually nowhere to go but up is a "concern".

I do like the additional flexibility (minimum payment possible and 10
year draw period) offered by the HELOC in case of emergency vs. the
balloon though, as I said, I think the NECESSITY (vs convenience) of
that is pretty unlikely. But nothing's impossible. ;-)

Anyway, I'd truly appreciate hearing pros/cons, cautions, whatever from
folks with experience in home financing.

TIA

BTW, I've checked into fixed interest options but haven't found one that
offerred enough difference from my current mortgage to make it
attractive.

Thanks Bill, Dimitri, and Neil for you suggestions.

My intent, had I gone with the HELOC, was to keep making essentially the
same payments (including regular prepayments of principal) that I would
have been making with my current mortgage until it was paid off
completely by (or before) early 2006.

The attraction of the HELOC was the low interest rate (now at 3%) which,
IF sustained or even raised GRADUALLY over the next 2.5 years, would
result in a decent net savings in interest paid and/or an earlier loan
payoff date.

Being VERY conservative in financial matters, I think the HELOC's
"availability," and the consequent risk of abusing it that Neil
mentioned, would have been a "consideration" but not a real problem.
However, the PROBABLE increase (and the quite POSSIBLY RAPID increase
over even a short time period) of the HELOC's interest rate, viewed in
comparison with the relative attractiveness of my existing
fixed-interest mortgage arrangement, was the deal-breaker on the HELOC
for me.

Had the HELOC included a "fixed rate conversion option" (mentioned by a
reply to the message which I accidentally posted on alt.home.repair and
quickly cancelled -- though, apparently, not quickly enough), I think
the deal would have been attractive enough to grab the HELOC. But it did
not contain that option.

So, I've come to the same conclusion that the replies to my post
suggested, i.e. NO CHANGE, "If it ain't broke, ......" etc.

Thanks for helping me clarify the options.

(Neil) wrote in message . com...
(D. Gerasimatos) wrote in message ...
In article ,
Bill Seurer Bill_AT_seurer.net wrote:

With only 3 years left on the loan why are you considering refinancing
at all?


I agree. The real struggle will be paying the balloon. If you can do that
then don't worry about it unless the amount financed is very large (and
hence the interest savings is large).

Agree. The OP said paying the balloon payment in 2006 was no problem,
so I'd just plan to do that, not get into a new mortgage.

If the OP can make extra payments now, that should save money by
reducing the amount of money spent on interest. I assume that would
also make the balloon payment smaller also.

What would I do? Pay extra on the existing mortgage at every chance,
then pay off the balloon payment in 2006, and have no mortgage at all.

The home-equity line of credit has another problem for me: it'll be
tempting to use it pay for other things, thus increasing the debt and
making it harder to get out of debt.

One more thought: if the HELOC has a variable rate, that HELOC could
turn out to be a trap if interest rates rise between now and 2006.