Miscellaneous HELOC / Refinance Question

[loanmoron]

CLIFF NOTES AT BOTTOM

2+2 experts, I request your assistance in analyzing my situation. I'm posting anonymously to save any shred of dignity I have left. The skinny;

I recently changed jobs and went through a tough phase financially. I'm coming out of it, but dealing with repurcussions, including 20k of credit card debt at ridiculous interest rates (20's)

I have a 190k mortgage at 5.625% on my home going forward 30 years. My house is worth over 400k, possibly 500k. I bought this house from close family members who were happy to wait for their equity, in return for my assuming the current debts on the house. This family member is asking for around 30k of their equity in the house right now. (and wants another 110k in ten years, to settle everything)

I've been speaking to a mortgage guy. My two options are as follows;

1) Borrow 50k as an interest-only HELOC at 10.75% over 15 years. 10 years interest only. The rate is very high due to my credit and the lack of solid income history. I would pay this down by making "standard" mortgage payments plus extra principal, not just pay the interest and have a balloon waiting for me at the end of 15 years. I'm spending almost $800 per month NOW for the 20k debt, and paying down almost none of the principal.

2) Refinance entire mortgage at 6.75%, taking 50k extra cash back.

I ran some numbers, and found that when borrowing 50k, it was cheaper to borrow using the HELOC and keep my existing mortgage. The break even point was in the 60's, where it would be better to take a higher rate on the entire nut.

These were relatively basic calculations, however, and I'm asking you guys for the other stuff that maybe I'm not thinking of. For example, the interest rate on the HELOC can change. This could blow my calculations out the window should the rates go up. It's hard for me to quantify that. Keep in mind that I plan on paying the HELOC down within 8 or 9 years, and not 15.

Please try to keep responses out of the realm of "you're getting raped, i can get you a better rate." Not my question, really. Perhaps there are other loan options which I'd be willing to consider, but I'm relatively confident doing either as an alternative to what I'm currently doing.

Cliff Notes;

Trying to get smarter with my debt. Can borrow 50k @ 10.75% over 15 years (10 yearInterest Only HELOC), or can turn 190k @ 5.625% into 240k @ 6.75%. Please advise.

[TLC]

What are your upfront costs on the Refi vs. HELOC?

[loanmoron]

[ QUOTE ]
What are your upfront costs on the Refi vs. HELOC?

[/ QUOTE ]

I don't know. I forwarded that question to the appropriate authorities. I assumed from the beginning that they'll be relatively similar. Also, I'll be burying the up-front costs into the loan. Definitely a factor, thanks.