Please advice for refinancing

mfhos093 · Joined: 19 Mar 2008 Posts: 1

Northern Virginia

Looking to do 30 yr fixed with combined loan

Living in house for 2.5 yrs

Planning to live in the house 7-10 yr

Frist mortg 377k 5/1 arms 5.6% interest rate
2nd mortg 45k 30 yr fixed 8.2% interest rate

Total loan = 422k

Purchase price = 471k
Market value = approx 430k
Credit score = 684

One mortg. company is offering me 2 options

option 1:
Pay 5k to make it below 417k to have a conventional loan

One mortg 417K with 30 yr fixed 5.25% rate

No PMI or No Points

Closing cost = 8/9K

option 2:

Frist mortg 377k 30 yr fixed 5.35% interest rate
2nd mortg 45k 30 yr fixed 7.0% interest rate

No PMI or No Points

Closing cost = 8/9K

Please advice/suggest me.

Thank you

m2c · Joined: 03 Aug 2005 Posts: 767

A note rate of 5.25% +/- on a 30-year fixed rate loan of 97% (98% + LTV on the jumbo) with no points or MI is, to say the least, rather “aggressive” to say the least. Perhaps even unbelievably aggressive. I’d get everything in writing before putting up any money. $8-9K in closing costs is a tad high but VA is close to the source of all budget fiascos so this may be typical for the state.

If you go to “option 2” your combined payments will increase $101.92 over “option 1” but you won’t have to shell out $5K. Straight division, that’s 49 month “payback”; consider it an implied “loan” of $5K and the “rate” over 7 years is nearly 17% (actually a bit higher since the amortization speed is slower on the higher rates even ignoring the implied loan bit). Either way I’d hop on the conforming side if the extra $5K is readily available.

Is it worth it to spend $8-9K for any refinance? You’ll be going down $100 to $200 per month plus pushing back amortization 2.5 years for this layout of, say, $9K. Again, $9K divided by $200 is 45 months. Yes, you’re getting out of the risk 2.5 year hence of a possible rate increase on the 5/1. A thought, what if you put that $9K against the principal? What are the possible “worst case” payment changes after year 5? Obviously the more logical choice would be to place the $9K against the second but you’d realize only term reduction this way. Refinance may work for you but I’d have the LO go over all the future figures with you before you decide.

prestonian · Joined: 19 Sep 2006 Posts: 15

I've a loan program better than this where the closign cost wouldnt be that much and also you dont need to put any amount to make it less than $417K. we can offer you tha same rate be it more or less than $417k

If interested please call me on 866-207-5340 extn:1103(Marshall)

liverichly · Joined: 10 Feb 2005 Posts: 198 Location: Orange County, CA

It's called a bait & switch... they bait you into doing the deal and at the last second tell you about the real terms. No lender right now, nor for the past few months, has been able to offer 5.25% on a 30-year fixed rate with no discount or origination points.