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Nephythys · 03-20-2007, 11:09 AM

Ok-
I have never had a home before so when we got into the first mortgage I did not understand it all-

We have an 80/20
The 80 is an adjustable rate balloon. So not only does the rate increase, but the note comes due in 30 years. That would mean 15 years worth of payments at the end of that term
Ouch.
Refinancing this loan before 24 months carries a 6 month interest penalty.

The 20 is a 30 year fixed- just at a higher rate. Can do a re-fi anytime, no penalty.

We also have a small home improvement loan for the new windows we put in. 7 years, no penalty for pre-payment.

I have been working with someone on a re-fi- I wanted to get money out of it (if possible) to consolidate debt but it looks like a no go- here is what she came back with.

1st $167250
30 year fixed
6.875%
interest only payments $958.00 (for 10 years)
includes the 6 month penalty on the old loan- new loan has no penalty for prepayment

2nd $43000
11%
fixed for 7 years
interest only $394
includes home improvement loan (and works as a line of credit, I can pay it off and re-draw from it)

$1598.00 new payment
$1754.00 old payment

$156 per month savings

I told a friend at work whose husband works (or used to) in the industry and she said an interest only is bad. That I will lose (or not gain) equity in my home and that when the interest only ends I will get bit with a huge change in payments. She said it is good for short term homes, but not for one you will live in for a long time.

I know nothing about them-and I am more baffled now than ever.

Is this going from bad to just slightly less bad- or is it a step in the right direction?

03-20-2007, 11:09 AM	#4
Nephythys Yeah, that's about it- Join Date: Jan 2005 Location: In a state of constant crap to get done Posts: 2,688	Ok- I have never had a home before so when we got into the first mortgage I did not understand it all- We have an 80/20 The 80 is an adjustable rate balloon. So not only does the rate increase, but the note comes due in 30 years. That would mean 15 years worth of payments at the end of that term Ouch. Refinancing this loan before 24 months carries a 6 month interest penalty. The 20 is a 30 year fixed- just at a higher rate. Can do a re-fi anytime, no penalty. We also have a small home improvement loan for the new windows we put in. 7 years, no penalty for pre-payment. I have been working with someone on a re-fi- I wanted to get money out of it (if possible) to consolidate debt but it looks like a no go- here is what she came back with. 1st $167250 30 year fixed 6.875% interest only payments $958.00 (for 10 years) includes the 6 month penalty on the old loan- new loan has no penalty for prepayment 2nd $43000 11% fixed for 7 years interest only $394 includes home improvement loan (and works as a line of credit, I can pay it off and re-draw from it) $1598.00 new payment $1754.00 old payment $156 per month savings I told a friend at work whose husband works (or used to) in the industry and she said an interest only is bad. That I will lose (or not gain) equity in my home and that when the interest only ends I will get bit with a huge change in payments. She said it is good for short term homes, but not for one you will live in for a long time. I know nothing about them-and I am more baffled now than ever. Is this going from bad to just slightly less bad- or is it a step in the right direction?
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