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I just read that now is the right time to refinance, while “the Federal Reserve keeps prices low,” especially for people with mortgage rates. We have one 2 two years loans variable rate loan (7% and 10%) for 2 years in August. The only problem is that between the two of us we have $ 6,000 in credit card debt, which is below the maximum so that our credit cards are maxed out and we have slow payments. Should we refinance now or should we wait until we are out of our credit card debt (which will not be for 4-5 months) pay?

5 Thoughts on Should I refinance now or after I paid my credit card debt?
  1. Reply
    December 18, 2012 at 1:56 pm

    Frankly, I think that rates will be low for at least another 6 months so if you can knock off that debt, that would be a good move. Realize you won’t see the impact immediately, but then when you do a refi unless you lock the rate in there is some “time” that elapses anyhow. If you can do anything more to cut expenses and/or increase income that would be great. You want to go in with as strong a position as you can and get the best rate possible.
    IF you’re planning to stay where you are for a good length of time, I’d ask you to get a NO prepayment penalty 30-year fixed mortgage. You can then pay MORE each month (separate check, “principle only” in the memo) and knock that thing down. If you do a 15 or 20 year though, if something bad happens, you could end up not having the full amount and all hell breaks loose.
    Good luck!

  2. Reply
    December 18, 2012 at 2:15 pm

    The rates will probably remain low until after the election is over so if you think you can have your bills paid down by then, I would wait. If not, go ahead and try.

  3. Reply
    fred f
    December 18, 2012 at 3:04 pm

    I also believe the rates will hold for at least 6 months and really believe that in the next 1-3 months there will be another 500 basis points drop by the feds. I recommend that about June, I would refinance (that is when I am) and not wait.

    Your real challenge is to get your CC debt gone and to increase your income. I highly recommend that you pay the card that has the lowest balance off 1st, by making the minimum payment to the higher balance card and when the lower balance card is paid off, add that payment amount to the higher balance card. Once the 1st card is paid off, shut it off. Call the company and cancel it. When you get close to paying off the 2nd card, look for a card that pays you something to use it. That is not airline miles as that takes so much to get a payoff, it is not worth it unless you travel extensively each and every month. Look for a card that pays you $ ‘s, such as discover, etc. I have both a discover and a GM mastercard. The GM card pays me a nickle for every dollar I spend towards a new car. You can laugh, but I have used it 3 times in the last 10 years and saved over $ 5K on top of any deal and currently have a balance of $ 1200.00 towards another car/truck. I only have charges on 1 card and keep them paid off. I rarely use them at all anymore, except for large purchases as I use theri money instead of mine for 30 days or longer depending on billing cycle.

    Checking accounts. Look at your checking account as a source of income. Banks such as mine, pay interest for haivng it with them. I pay no fee. The caveat is that I have direct deposit, use the card 10 times per month and get my statements over the net. In addition, if I use the card at an ATM that is not with the network (my case shazaam), they will refund up to $ 25.00 per month in ATM fees if I do the other part. Last month they paid just over 4% on my balance. For 07, I got an extra $ 500.00 from them for the whole year, as I do not have a separate savings/money market account anymore.

    Good Luck

  4. Reply
    December 18, 2012 at 3:56 pm

    It is ALWAYS a bad time to HAVE an ARM. Contrary to MYTH, the purpose of an ARM is to protect the BANK against higher rates by passing them to borrowers. If you have an ARM, it is time to refinance, NO EXCEPTIONS.

  5. Reply
    December 18, 2012 at 4:37 pm

    No one really knows what the economic standing will be in 5 months. Like the stock market there are too many complex unforeseen factors to consider.

    That said get out of the ARM as soon as possible. ARMs are volatile and can alter your financial situation drastically. Get into a fixed rate ASAP.

    Pay down your credit cards as soon as you can. But put emphasis on getting out of the ARM for now. You may be able to free up money getting a better rate and commence paying off your credit cards then. If you’re credit score is at modest or high levels you are in a good position to focus on improving your mortgage situation.

    The Fed is expected to cut rates 50 bps following a historic rate cut just last week. The Fed’s key rate is the federal fund rate, which is the interest that banks pay each other on overnight loans. It now is at 3.5 percent, but is expected to drop to 3 percent at the Fed meeting Jan, 30th 2008.

    Banks would be expected to lower their prime lending rate by a corresponding amount — from 6.5 percent to 6 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Should all this happen, then both the funds rate and the prime rate would be at nearly three-year lows.

    Home equity loans and lines of credit are already reaching attractively low levels and consumers are expected to take advantage of a borrowers market. If you wait to refinance you may run into slow loan processing as many did during the refinance wave in the early part of the millennium.

    Is now a good time for you to refinance? Much depends on how low your rate offers are in comparison to your current mortgage rate. If the rates are just .25% lower you could save hundreds even thousands of dollars when refinancing your home.

    Should You Refinance My Home Equity Loan?

    Home equity loan product rates are expected to drop to levels lower than they have been for years. Compare home equity loan rates offered by lenders to those you currently have. You may be able to save hundreds if not thousands over the life of the loan refinancing at today’s lower rates.

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