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What the … My c/c rate is lower than my mortgage!

by J. Money on Wednesday, April 23, 2008

MapGirl put out an interesting post yesterday about crazy interest rates these days, and it got me thinking. I, myself, have been coming across some pretty interesting things lately! Just take a look at our current interest rates:

  • 1st Mortgage – fixed: 6.875%
  • 2nd Mortgage (HELOC) – variable: 4.80%
  • Credit Cards – variable: 5.25%

Can you believe that?! My credit card rates are LOWER than our 1st mortgage! haha…and it’s not even by a little right now, it’s by a whole point and a half. I get that our HELOC and c/c’s are based on the prime rate, but my goodness it’s pretty funny to look at.

Now, if i had the balls like some of you have, i’d take out a chunk of the credit card and throw it against our 1st mortgage! we’d save some pretty pennies for sure, but the whole thing scares me :) As soon as those rates start hiking back up, we’ll have to knock away that credit card debt…and fast! We can’t “lock in a rate” there like we can for our HELOC.

Speaking of which, although our $62k in our HELOC is variable right now, we always have the option of “locking in” a rate for a portion, or all, of the balance. While i don’t think it’s a good time right now, it’s def. something for us to consider as the economy starts picking up. I’ll be sure to keep you posted (pun intended).

In a perfect world though, we’d like to correct these #’s by refinancing our 1st mortgage. Bankrate is currently showing a national average of 5.79% for a 30 year fixed, which would save us a hefty $245 per month! BUT, there are a few hurdles we’d have to jump through:

  1. We’d have to get it at “interest-only” – Currently this allows us to have a lower payment each month, while still giving us the ability to pay extra towards the principal. (It’s not good for everyone, but for us it works.)
  2. Our house would have to appraise within 10k of our purchase price – And since our HELOC was recently frozen :(, i’m gonna guess this is a long shot.
  3. We’d have to pay closing costs and probably a point or so if i had to guess. – In the long run this would work to our benefit, but w/ Mrs. Budgetsaresexy soon to be in graduate school, we don’t want to be shelling out much…esp if we might sell/rent out in the near future.

So, this leaves us back to square one :) But i’m not complaining! In fact, i hope the Prime keeps going lower to be honest. Selfishly, it effects us much more positively than does saving/bond/etc rates. On the other hand that would mean the economy isn’t doing all that great….and that’s plain scary!


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