Getting rid of a HELOC

[SomethingClever]

Situation: I bought my first home about 2 years ago. At the time, I believe I put 5% down, and got a 80 and 15, with the 15 being a HELOC.

I was just looking into ING's "no closing costs" deal to see if consolidating my loans even at a higher rate than my current ARM made sense (because I believed I was paying mortgage insurance on the 80, and my HELOC rate has increased quite a bit).

Well, it turns out I'm NOT paying mortgage insurance! So the Orange deal won't save me anything on my original loan. However, I'd still like to get rid of the HELOC since it's interest-only, and the rate has gone up so much.

Is it possible to simply refinance that portion of my loan with Orange? It's handled by Chase at the moment.

[Six_of_One]

You can always refinance your HELOC into a fixed-rate 2nd mortgage, but I'm not sure if the rate will be much better. If your house has seen significant appreciation in the past 2 years, your combined loan-to-value might be low enough that you would qualify for the lowest rate. Basically, if the total amount you owe is now less than 80% of the value of the property, you'll probably be able to get a rate lower than what you're currently paying for your HELOC. That doesn't mean your payment will be less, necessarily, since it won't be an interest-only payment.

[DesertCat]

If your appraised value has increased you might be able to refi your first with a larger new loan that consolidates your first with your HELOC. I just did something similar because I wanted to convert my ARM to a fixed. My interest rate went up slightly on the proportion that was the first, but way down on the proportion that was the HELOC. I calculate my payback period at about 1.5 years.

[SomethingClever]

[ QUOTE ]
If your appraised value has increased you might be able to refi your first with a larger new loan that consolidates your first with your HELOC. I just did something similar because I wanted to convert my ARM to a fixed. My interest rate went up slightly on the proportion that was the first, but way down on the proportion that was the HELOC. I calculate my payback period at about 1.5 years.

[/ QUOTE ]

I know I can do this, but I don't think it will benefit me much if at all. What I'm wondering is if I can just have ING loan me the amount to pay off the HELOC and treat it as a 5/1 or 7/1 ARM.

FWIW, my first loan is an ARM and the rate will go up in 2009. But I almost certainly will have sold my property by then, so I don't think it's worth getting a fixed loan at this point.

[schnoodleC]

Usually second mortgages are fixed and at a higher rate than the going rate for first mortgages. You can sometimes lock the rate on your HELOC for slightly more than the going variable rate. This will not save you money but will protect you from paying a lot more as rates continue to rise. Talk to the existing holder of your HELOC to see what they can offer you.