Q: I live in California and I have a first mortgage and a home equity line of credit with the same bank. My first mortgage has a rate of 5 percent fixed for 30 years and the home equity line of credit is prime plus 1 percent.

I have been paying my loans on time, without any late payments. I called my lender to ask whether I could combine the loans or refinance them into one loan and I was told that I could not. They offered me a first mortgage refinance at a rate of 4.65 percent plus 1 point for 30 years, with no PMI, and no income or asset verification. Then the lender said I could add up to $2,500 of the total closing costs to the loan.

Like most people, I am upside down on my mortgage and my current loan-to-value ratio on my property is 155 percent. I made a separate call to the bank to inquire about converting the HELOC to a fixed rate and was offered a 10-year rate at 8.25 percent, which I declined.

I am looking for advice on how to approach my lender and ask to have both loans converted into one loan at today’s current rates.

A: A lot of homeowners are also wondering how to take a first mortgage and a home equity loan or line of credit and combine them when they don’t have enough equity in the property. The short answer – there is no good answer.

But let’s look on the bright side: Your current 5 percent first mortgage is at a great interest rate. Your home equity line of credit (HELOC) at the prime rate plus one percent is also a great rate. At today’s prime rate of 3.25 percent, your interest rate on that loan is only 4.25 percent. You really can’t get much better than that today.

While you can refinance your first mortgage, you’ll pay a lot in costs. If your loan amount is $300,000, paying one point to get the lower interest rate will cost you $3,000 plus other closing costs. Those other closing costs might be around $2,000. So the total cost to get the lower rate would be about $5,000. Your monthly savings would be about $90 but it would take you about a little under five years to break even with the costs to get the loan. That doesn’t sound like a good deal to me.

Likewise, your HELOC has a pretty good interest rate right now, although it is a variable-rate mortgage. If interest rates go up in the future, you could get hurt by those increases. On the other hand, you could put the $5,000 that you otherwise would have spent refinancing your first loan to pay down the amount you owe on your HELOC.

If interest rates remain stable or rise just a bit over the next several years, you certainly will benefit from the terms of your current loans without having to pay money to refinance. By prepaying your HELOC, you can head off any extra financial stress caused by rising interest rates.

The bad news is that you will find it difficult to get a lender to refinance your mortgages at this point in time because you owe more than the home is worth. And even if you could refinance, you’d pay more each month than you’re paying now.

Read more:
Homeowners Struggling with a Second Mortgage Get Some Help.

Mortgage Loan Modifications: Do you have to be late to qualify?