Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

12/08/2009
Are there any resources available to help longtime homeowners who have an outstanding HELOC to refiance and roll in a 2nd mortgage?
In light of all the concessions being made to help homeowners, do you know of anything that is in place to help a long time home owner (25+ yrs) refinance and roll in a 2nd mortgage when you also have an outstanding HELOC? I live in Texas and there is a rule currently in place that will not allow you to do this as long as you have an outstanding HELOC (Home equity Loan). It would save me almost $500 per month if I could roll my 2nd mortgage balance into my primary mortgage balance:

Primary Mortgage: Bal $90,000 / monthly payment = $1072
2nd Mortgage: Bal: $21,000 / monthly payment = $450
HELOC Bal: $11,000 / monthly payment = $133
Credit Card Debt = $8,000

I am not interested in selling at this time. I love my home and it suits me well. The only reason I would sell would be, if after retirement I had a serious downturn in finances, or if health issues arise.
Jody Rorick, CPA:
expert info »
I would find out if I could refinance all three together into a primary mortgage.
Gail V. Marquet:
expert info »
I would suggest you pay off the HELOC and credit card debt as quickly as possible. Then you can refinance rolling the 1st and 2nd mortgage together. For future projects in your home it would be best to save and pay cash for them rather than get in this situation again.
Nancy Granovsky, CFP:
expert info »
You would need to visit with your lender(s) to determine your eligibility for loan modification and to determine options tailored to your specific situation. The highest Annual Percentage Rate of interest that you are paying is likely on your credit card debt. Paying this off as quickly as possible will free up money that can be used to pay down other debt.

Check out http://makinghomeaffordable.gov for information about refinancing and loan modification and to determine if you may be eligible for federal assistance. The website features a variety of useful resources and links for homeowners.

The Office of the Texas Comptroller of Public Accounts has summarized Home Equity Lines of Credit (HELOC) this way at http://www.window.state.tx.us/comptrol/cra07/ch01.html#fnN29:

Texas voters authorized two amendments to the Texas Constitution in 2003. The first permitted lenders to provide home equity lines of credit (HELOCs) to Texas homeowners. The second allowed the refinancing of a home equity loan with a reverse mortgage. Interest rates are lower on a HELOC than on unsecured loans from most lenders, and interest paid on a HELOC can be deductible from federal income taxes.

Home equity loan funds may have a value equal to 80 percent of the market value of the home less any loans secured with the home and can be used as needed for any type of expense. A traditional home equity loan is extended for a specific time period with required repayment of interest and principal in equal monthly payments at fixed interest rates. A HELOC is a revolving account that allows the homeowner to borrow from time to time up to a certain credit limit.