Hi rivkadr, Okay, so some clarifying questions, then. I expect I will sound very stupid, but please recognize that I generally don't deal with money matters too much myself, so a lot of this is over my head. PUHLEAZE!!!! You deserve (and GET) my sincere respect for so MANY reasons!!!! A) You're willing to OPEN your MIND to serious financial topics (and not just swallow the emotional poop passed down from those who've never tried to understand!) B) You're willing to be completely OPEN WITH YOUR DETAILS (even if anonymously... you have no idea how many people are afraid of simply being real, even when nobody can know who they really are!!!) C) You are SO GENEROUS to do so out in the open on a public message board, where your learnings can be silently read and absorbed by others who WISH they had your guts!!!!!!!!! I cannot emphasize enough THE HONOR YOU DESERVE for taking this on, step by step, out in the open!!! TRUST me when I say, there are MANY folks who feel much "dumber" about their questions... and hate the fact they haven't had the courage to step out like you are. Your COURAGE trumps all... and it is the ONLY way anyone gets "smart!" OK, with your questions; 1) Itemize your current liabilities, and for each; Liabilities, I assume you mean things like student loans, mortgages, etc? i.e. stuff we owe money on. Exactly... make a laundry list for us here. If you have a recent credit report it will show much of what we are asking about... otherwise gather up your monthly bills. Example; $461,356 1st mortgage, (pull out your NOTE to check on the following,) 5 yr ARM in 3rd year, (amortized, or interest-only?) Start date was July X, 2005 Initial Fixed rate is X% Margin is 2.25 (or it is 2.75, or other?) Index is 1 month LIBOR (or 6 mo LIBOR? 1 yr LIBOR? Treasury index?) $45,356 Student Loan, consolidated from multiple loans, Interest rate is X%, minimum payment required is $YYY (or a % factor, if you know,) $12,486 Provident Visa card, 8.9% rate, 2% of principal minm payment (By the way... the 2% of principal is the standard minimum payment for revolving credit.) $8,594 Ford auto financing, 3.5% rate until 1/1/2010, then 8.9%. 8 year loan, minm req'd payment $x,xxx You get the idea... 2) Itemize your appreciating assets, and for each; What would an appreciating asset be? Are these like stocks? We don't own anything like that anymore. We have my husband's 401k -- does that count? Appreciating assets are real estate, stocks, mutual funds, bonds, cash-value life policies, pensions, annuities, securities held INSIDE your 401(k), IRA and ROTH accounts, and similar. Non-appreciating assets are your non-cash-value (term) insurance policies of all types, anticipated inheritances, business ownership, personal effects (tools, furs, jewelry, etc.) 3) What is your personal realistic exepected growth situation for your home over the next 10 years? Expected average annual rate of growth, 10 years? Total growth in dollars? I have no idea how I would estimate things like that :( I have no clue on most of your growth rate questions (except maybe our expected income -- I can hazard a guess on that). That is really *OK*!!!!!! When the answer is "I have no idea" it triggers some follow-on questions; (And its perfectly acceptable to "cheat" by asking realtor friends, checking Zillow, or Googling your local negihborhood name along with the keywords of "appreciation rates in Irvine" (or wherever.) Are you familiar with the past longterm trend of real estate in your area? If so, what was it? Do you believe that the future longterm trend will be significantly different? If so, in what way? 4) What is your estimated current NET Worth? Can you have a negative net worth? Unfortunately, yes... in fact the MAJORITY of the general public has a negative net worth. That happens when the total cash value of everything you own (and could sell,) is less than the total repayment balance of all the debts that you owe. I just reran our budget; due to my husband's job changes and a raise on my part, we're actually making an extra $3500 a month. Does that change your little form up above at all? That doesn't change the questions (especially the "divvy up your 1st and 2nd extra $1,000,) but it does give you some extra growth power, which is ALWAYS a good thing when you know how to employ it most effectively. ONCE AGAIN... I HONOR YOU FOR YOUR UP-FRONT COURAGE!!!! (I suspect you are "giving" people a great deal in this exchange!!!) Cheers, Dave Donhoff Strategic Equity & Leverage Planner

I'd really suggest NOT trying to personally "make the call" of when the rates are 'at their best.' That's an exercise in futility, and even the best & brightest traders who make their living with real money on the line do not do that. INSTEAD; take your time and choose a target rate that WILL work for you. One that you won't kill yourself if you lose out on getting, and yet you'll accept as sufficient even if it gets locked and closed yet rates go further down. Remember though, pick a rate too low and if the market doesn't get there you then ride the wave from there. (Personally I wouldn't be overly worried though... rates are unlikely to rise significantly for many many years.) BOTTOM LINE; Pick your target, get your credit file pre-completed, and and set the "target rate lock order" with a good loan officer you know and trust. Then, go live your life and wipe the stress out of it. Have an awesome, easy, lazy summer! Dave Donhoff Leverage Planner

Billl, yes you ask some good questions about plans changing. That's always something to consider, in any endeavor one embarks upon. The credit card, by the way, I already mentioned would be paid off before doing a refi. As for 70% ROI, actually, a number of the trades will be done by us (sweat equity). If we were completely contracting the build out, it would be closer to $140, so I actually considered the 70% ROI when estimating the after-build value. Additionally, though you didn't ask about our particular market, the property is just a couple of blocks from the ocean. The main house has a very nice view, and thus enjoys a preimium in value (and even in this down market, I get unsolicited offers to sell). And the new apartment would have a 270-degree, unobstructable view, again adding a premium that I'm not counting on, but know it's there. If house values continue to stagnate, which is a very real possibility, we can choose to rebuild equity by taking the rental income and using it for accelerated mortgage payments. Your first comment, "I guess some people never learn..." Well, I'll take that with a grain of salt. I too am frustrated by the economic mess. But I also know that to get out of the mess, those that can move forward with building projects, business expansions, and other entrepreneurila activities will be those that are part of turning things around. On this project alone, I would be putting two laid off friends to work (both skilled building tradesmen) for about 4 months. That in turn keeps them able to pay their mortgages. And when neighbors stop by to see the construction project, maybe they'll think of projects at their homes that need doing (especially when they see the quality work these 2 guys do)! And then maybe these guys have enough work so they're making a living again and their homes are not in jeopardy. So maybe they'll buy some new tools to expand their business capabilities, and it continues to spiral upward from there. Just think if people started thinking that way for a change instead of waiting for everyone to wait for someone else to fix the economy?

Actually the two scenarios aren't the ones to compare, because if you keep the existing mortgage (~$1000/mo payment) and add $500, you'll be paying $1500/month. If you refi, your payment will drop to $886/mo, and adding $500 to that gets you just under $1400/mo. To equalize out these two scenarios, I'd instead compare paying $1500/mo on both options, since you can presumably afford that. So it would be $500/mo extra on the existing or $613/mo extra on the refi. Running an amortization on both, you'd pay off the loan about 5 1/2 months faster with the refi, saving around $8000 in interest. Given that it'll cost you $2500 to do this, you end up winning if you refi. Have you looked into getting a HELOC instead, assuming this is a low percentage of your home's value? Closing costs are lower on a LOC, and if you are going to be paying it off in 4-5 years, there's minimal interest rate risk. How do the rates on a 5/1 ARM compare? That would be something else to consider, since you'd have it paid off by the time the rate resets.