Loan Scenario: AL, $284,000, 799, 80% LTV, Refinance (Rate and Term)

I am looking for advice on weather or not to consolidate loans: 

• 30 yr first mortgage at 4.875% with a balance of $178,875 and 24 years remaining on a home value of $355,000
• HELOC balance of $81,534 of $130,000 availalbe credit at a variable rate of prime minus 1.25% with a 3% floor - currenlty making interest only payments of $203.
• Would like to take cash out for new windows, insulation,  and other home improvements to take advatage of current tax credit
  

I can take out a new 80% LTV first mortgate of $284,000 at 4.875% with no points and abot $2500 closing costs for a new 30 yr.   This would take advatage of locking in low rates and hedge against my variable HELOC increasing, but I would start the clock over on my 30 year mortgage.  Right now, cash flow is more important to me that paying down my mortgage sooner.

Please advise if you think this is a good move to consolidate.  Or, would it be better to take more cash out against current HELOC to pay for improvments and double up on HELOC payments in future - also leaving HELOC open for other future needs?

I would refi. The primary reason being that your HELOC balance is a substantial portion of your total debt load and would grow to be an even larger portion if you were to cash out further. The prime rate will certainly head north and probably move much higher over the next 10 years. Just a couple short years ago it was at 8.25% and with some of our current policy lending to much higher rates in the long term, I think the best bet would be to lock all of your debt in. Maybe even consider a 25 year note if the payment is tolerable, as this would solve the problem of re-setting your amortization.

Believe me....when the prime rate is north of 8% again in a couple of years this is a decision you will be happy to have made. You will feel even better about things if we get north of 10-11%, which is at least somewhat likely.

Good Luck,

Jason