Real Estate and Home Mortgages - Refinance of HELOC

I purchased a home a year a go with little down (3-5%) and have a primary mortgage (30 yr fxed, interest only), and an interest only HELOC (around 8.25% now).

I want to get my second mortgage rate fixed so it doesn't keep going up. I'm fairly happy with my first mortgage rate given the current market, but my orginal lender contacted me about refi-ing my second.

Also, I recently found an error on my credit report that dropped 2 of my 3 credit scores significantly. I just took care of it, but probably won't be reflected in my credit report for almost a month.

Here are my questions

Does it make sense to refi now and get a locked in rate (~7% after buying down 3 pts)?

Do I hold off until my credit report is updated and risk rates going up further? I was told my score needed to be about 20 pts higher to get a better rate (don't know how much better the rate would be)

Do I try to refi the HELOC and primary into one fixed jumbo mortgage? (may take a year or two to get enough equity in the house to qualify)

Any advice would be appreciated.

Bob

I would never pay 3 points, certainly not on a HELOC. 7% is not significantly lower than what you have now, for 3 points. What are they offering for NO points? Probably about what you have now.

If it were my situation, I'd shop for a fixed rate 2nd, not a HELOC. Just the change to simple interest on an installment loan is a step in the right direction.
I would also go with a different lender. Whatever they have now, in a worse market than a year ago, how can it be better than what they had last year? And if it really is better, then why didn't they offer it to you then? Were they trying to set you up to want to refi a year later to get another loan? That's the reasoning behind lenders pushing ARM's and interest only loans--to get another loan in the near future when the borrower wants to get rid of these things for something stable.

Shop around. Other lenders. 15 year fixed rate mortgages. The rate may not be better than what you have now, but don't be fooled by paying points to think that a lower rate always means better loan. You still pay for it. ;)
Just get to simple interest instead of revolving (HELOC's are more like credit cards than mortgages) and a fixed rate.

See what that does for you. It could be that waiting to refi and combine these loans in a year works out to be the best plan.

The refinance would be for a fixed rate second mortgage (30 yrs). The original rate was 10% before the points. My credit rating took a dive after my purchase due to an error I'm trying to get removed. The refi would get me a fixed rate which is my major impetus for doing it. I don't have much equity in the house now and I don't know how much the value will increase given today's market so I'm not sure when I'll be able to refi into one mortgage. I certainly don't want my HELOC to go up to 10 or higher before I can do that. Any thoughts on how much rates might increase over the next 6 mo? If they hold steady I may just ride it out until my credit rating is better so I can get a better rate.

Bob

I couldn't tell you what will happen tomorrow, much less in 6 months. LOL
Best bet: rates will go up. Some say that whereas we've been around 6.125% for most of the last couple of years, we might be around 7% in a year. That doesn't mean rates won't go up and down in between. Rates could dive in a couple of months and then shoot up higher than before the next day. Usually, rates are very slow to come down but can shoot up in a few hours at any time.
It's all gambling, really.