Refi to consolidate HELOC

[Tim Viviano]

Hi everyone! I've been on BiggerPockets reading forum posts pretty much every day since I joined a few weeks ago. It's incredible how much I didn't know I didn't know. I have a question about possibly refinancing now that I have about 80% equity in my main residence. When I purchased back before the crash I took out an 80/20 loan, the 20% being a HELOC, so I could buy with nothing down. My first mortgage balance is ~168K with 21 years left @4.375 and the 2nd is ~34K variable at about 10% right now I believe. The 2nd converts to payback in 2024. Total payments are about $1280 with PI on the 1st and int only on the 2nd. Does it make sense to refinance the sum at 4.75 for 20? That payment would be ~$1305 and I'd shave a year off my 1st and actually pay back the 2nd instead of int only (plus the occasional principal payment). It makes sense to do so to me but like I said previously, I don't know what I don't know. It seems weird to raise the rate on the bulk of the $$ though so I was wondering if there's something else I should do instead. All of this is conventional lending. TIA!

[Jeff Dulla]

@Tim Viviano I would think it makes sense. See the weighted average for your two loans. Not sure what your loan to value or credit score is but I would shop a little bit and check rates. Seems to be pretty clear based on the numbers you gave though unless you are saying you will pay off the second in a much quicker time frame. 

[Tim Viviano]

@Jeff Dulla Thanks for the blended rate that's helpful. As far as rate goes, 4.75 on a 20 yr cash out seems to be the standard I've seen so far. I've mainly been shopping closing costs seeing how much of their fees lenders would waive. As far as the second goes I currently have no plans to pay it off faster, but, I didn't know if there was some "hack" I was missing where it would make sense to keep the first at the lower rate but still get the HELOC paid off quicker than what I'm able to do without refinancing it. I Googled to see if there were any tricks I was missing on getting the HELOC paid off faster (other than additional financing) but came up empty so I figured I'd ask the pros here. I vaguely remember, a very long time ago, debt consolidation companies using HELOCs to consolidate credit card debt and doing something like having your paycheck deposited into the HELOC and paying bills from there. That was supposed to pay it down faster or something. I'm really hazy on the specifics and came up empty searching. Makes me think I made it up.