Do you have a Home Equity Line of Credit (HELOC)? Have recent interest rate hikes made it unappealing as a source from which to draw credit? Consider the following scenario presented by CNN/Money magazine (HT: Mapgirl's Fiscal Challenge):

Home-equity lines of credit were the crack cocaine of the home-improvement binge of the past few years, and it's easy to see why.

Three years ago, the minimum monthly payment on a $100,000 line of credit was just $333. But now that the prime interest rate (which is the rate most HELOCs are pegged to) has doubled to 8 percent, the minimum is $666.

If you can't pay off the HELOC, you may be able to convert it to a conventional loan.

Another solution is to refinance it and your mortgage into a single fixed-rate loan - if, that is, you can find a rate that beats what you are paying for both loans and saves you enough to cover refi costs.

So, that's what we're going to do! First, we'll need to determine your blended interest rate, which is where our latest tool comes into play! Just enter the appropriate data in the input fields below, and click "Calculate" to find your effective combined interest rate between your mortgage and HELOC:

Now, you have the key information you need to shop for a new mortgage where you might consolidate your debt. By comparing the Blended Interest Rate you determined above to the mortgage rates available today (in our view, Bankrate.com provides an excellent starting point for shopping for loans), you can quickly determine if consolidating your loans this way makes sense for you by seeing if lower mortgage rates are available.

But before you take the plunge, don't forget to take the cost of refinancing along with the potential of saving money in the long run into your considerations - Political Calculations has developed tools to help you do the math where these factors are concerned!

Labels: debt management, tool

- posted by Ironman at 6:05 AM | Permalink | |