Here's a pretty typical example of how mortgage refi's work here in sunny Phoenix:
msnbc.com
Michael Herr, a 33-year-old supervisor for a hair-dryer manufacturer near Phoenix, has refinanced his home three times in four years. The first transaction, in 1998, produced $25,000 in cash, which Mr. Herr and his wife, Shannon Kaiser-Herr, used to reduce credit-card debt and pay private-school tuition for three of their four children. Their mortgage-interest rate held steady at 9%, but the mortgage grew by almost a quarter, to $128,000. Their monthly payment rose to about $1,100, from $1,050.
A second refinancing boosted the Herrs’ loan to $133,000 and yielded $5,000 in cash. They have continued acquiring big-ticket items. Last Christmas, Shannon bought Michael a big-screen television for $2,200. “I don’t need it, but I love it,” he says. “We like to buy things.” Their credit-card debt grew to more than $40,000 in 2000.
This year, the Herrs, who had combined 2000 income of about $78,000, went back for a third refinancing. They tapped $20,000 more of the equity in their home, which was appraised at $165,000, up 19% from four years ago. Mr. Herr says his mortgage broker, State Mortgage, told him this would have to be the last time. With a new $160,000 mortgage, the Herrs have only $5,000 of equity left in their house. Their interest rate is now down to 7%, but with the bigger loan, their monthly payment is up to about $1,200.
Most of the $20,000 in cash they recently obtained went to chip away at credit-card debt, Mr. Herr says. But if there’s anything left over, he adds, they might spend it on a vacation.
HO HO HO! Got money for nothing? Got chicks for free?<G> |
