A Hassle Free 6 percent…

by Dual Income No Kids on February 22, 2008 · 0 comments

Seems relatively elusive these days.

As readers of our blog know, Miel and I have set the priority of paying off our second mortgage. We currently owe $16,700 at 9% on that loan. One way we wanted to address the debt is to refinance part of it into accounts with smaller balances. For example, we could borrow $5,000 at a rate lower than 9% and pay off part of the mortgage balance. So, we’re using a “divide and conquer” strategy.

Well, over the past couple of mornings I’ve been making calls to the banks we do business with. So far I’ve canvassed Washington Mutual, PNC Bank, Schwab and ING direct. Unfortunately, none of these business have been able to offer a hassle free product with an interest rate that’s low enough to meet our needs.

Since our current rate is at 9%, I anticipate that we’d need an interest rate of about 6% to make the transfer worth our while. This is translates to about a $510 difference in interest payments per year. Since we plan to discharge the debt by September 30th, the rate has to be sufficiently low – for us that’s around 6% – to make the hassle of transferring economically rewarding. No luck so far.

At this point there two options currently on the table: 1) A zero balance credit card transfer. This would slash the interest costs, but increase the probably that we’d be hit with hidden fees. 2) Borrow via a lending service like prosper.com or LendingClub. We’ve never borrowed using these services, so their rates and repayment terms are an unknown.

Best,

James

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