[Larry_OHF]

I wanted to share what I have been doing the past few days, and see what you all thought about it. Hopefully, my thread will be used by somebody as new to the world of economics as I am, and can benefit from it.

We bought our home for $71,000 dollars over a year ago, closing at 96%, and locking in at 8% interest on a basic 30 year loan.
Now that the interest rates are down to like 5%-6%, we wanted to refinance. Yet, even with a high beacon score and beautiful credit, we did not have enough equity in the home to have dropped below the 5% LTV cut-off. Then my oil furnace is discovered to have a cracked fire-box...(Conan, I need some advice on this one...).

Well, I remembered that I own 6 acres of forest land in Lenoir, NC and decided that I would take out a land loan. I went to Centura bank, because they seemed to be the only ones out of a group of banks called that were helpful enough to impress us. The loan I am getting tommorow is a 4 year loan of 60% of the value of the land. That comes to be me receiving $14,300 cash tommorrow. It is to be treated as a 15 year loan, until the end of four years. I make a monthly payment of $110.00/mo. The interest rate is 7.6%.

What I intend on doing with this money is :
#1) Pay off debts and bills, totalling 9,500,00. This includes credit loans that have interest rates higher than the consolodation loan I will put them into.
#2) Make home improvements(Conan...again), such as retiling kitchen and bath and finishing some other cosmetic needs of the home, thus raising it's appraisal value. A higher appraisal value means I can sell the house for more than I payed for it. I already estimate that I have $10,000 coming easily. This house is at least worth $80,000.
#3) Left-over money after that should be between $2,000 and $3,000 that I need to fix the furnace, open a secured savings account for the baby, put a couple hundred back for Christmas, and other emergency needs.

Then, we will set down with a bank and refinance the home, but instead of a 30 year mortgage...we will probably do what is termed as a 5/1 ARM. That is that for five years...we will be locked in a 5.6% interest...and after five years, the interest rate will go up at 2%/year, unless the national rates are not up that high. Then, it can only go up to a total of 6% of the original 5.6%. Yet, we do not plan on living here for more than five years, so what do we care if they go higher after five years?!

Of course...with the lower interest rate, my mortgage/mo. will be dropped by $150...and more principle is being payed and less interest wasted. So when we do sell the house...after paying the bank the outstanding balance, we will have more return cash! (insert jumping, happy man here).

With the extra cash per month, I can pay the land loan off early, and not worry about not having finished by the end of four years.

SO...what do you guys have to say???

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3rd Member of the Ancient OHF
Diamond Ranger of the ALSB (secretarial position & Ambassador)
Father of the wicked but cute child known as MaryBeth

Padre de una niña bien traviosa pero guapa
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Aisukuríimu ga tabetái desu.