Refinance proposal has kink.(FRIDAY HOME GUIDE)(MORTGAGE Q&A)

Washington Times, The, March, 2008

Byline: Henry Savage, SPECIAL TO THE WASHINGTON TIMES

Q: My wife and I took out a five-year balloon mortgage in 2003. The rate is only 4.50 percent and has been great.

Since five years is almost up, we received a letter from the lender explaining that we need to pay off the loan or convert it to a fixed-rate loan for the next 25 years.

They are offering the conversion at 6.75 percent with a $500 fee. The balance is now $292,000, down from the original balance of $320,000.

From your column, we understand that you do not recommend paying points when refinancing in order to receive a lower interest rate.

Is this your recommendation for us? If we accept this conversion, our payment will go up by almost $400 per month. Or...