Posted by Shane Milne on April 27, 2006 at 22:25:35:
Well since I don’t know much about your life’s ambitions or long term goals (just your short term ones) I can only recommend a mortgage that wouldn’t have many fees - the reason being is you only plan on holding onto your current home for a couple more years, so more fees to get a lower interest rate likely wouldn’t make any sense. That said, if your credit is good-to-excellent, you should be able to obtain a no-cost home equity loan(HEL)/line of credit (HELOC) on your current home. You can’t defer interest (on HELs or HELOCs that I know of), but with a HELOC you can just pay interest only…however it is adjustable based on the Prime rate, but the good news it that the Fed announced today it might “pause even if risks aren’t balanced” so that would be good news for people with debt tied to the Prime rate, and interest rates in general. You could refinance into a negative amortizized mortgage (defer some interest), but there are usually costs involved, and with the ones without costs typically a 3-year prepay usually applies (could prevent plans of selling in 2 years). You could probably find a negative amortized mortgage based on the COFI or COSI index about 1% lower than a HELOC though, so if your goal is truly cash flow (and not worried so much about some up front costs to get there) then an Option ARM would be a good option to consider against the HELOC.
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