refinancing Question

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Would i be able to refinance to anything lower than 5.75%? Refinance question: When i refinace a loan i pay off the original mortgage on my home and use the equity built up to put a downpayment on the 2nd mortgage?

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Not quite like that. When you refinance a home you are doing one of two things. A rate/term refinance (what it sounds like you are doing) where you are simply attempting to lower your rate or change your term. Or a cash-out where you are taking out the equity in your home.

The direct answer is yes, of course you can get a lower rate than 5.75%. The problem however is that you'd be shortening the fixed period from a 30 year to either an Adjustable Rate Mortgage (ARM) or to a shorter term (15 year fixed, etc.) The ARM is going to benefit you less in the long term if you don't refinance, and the shorter term (15 yr) is going to have a higher payment with less flexibility.

Overall if you're at 5.75% right now I'd say you're fine. You may want to keep an eye on that principle balance however and when you hit 80% of your homes value, look at refinancing out of the FHA so that you don't have that PMI issue, since you're putting a good bit extra in every month.

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Thanks. They are killing me with the pmi($67.54) I only put down 3% I could still get rid of these when i arive at 20% equity mark even though it's an FHA loan?

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

If you get to 80% before that 5 years, you'll still have to pay it. What I meant was if your house appreciates in value and you're paying principle every month, when you get to where you feel the 80% mark is then do a refinance.

E.G. You purchased your home for 100,000 and put 3% down. So you start at 97%. You are paying principle each month and in 1 year you have put in $1200 plus $2000 from tax return. You are about 93%ish. However your house value is now at $120,000. With that value increase you would be under 80% and you could refinance to get out of the PMI. You would have to pay closing costs for that, but you'd be out of that extra $65 a month.

Chances are if you are in an FHA loan there is a good reason for it. Lower income/high ratio, lowerish credit score, etc. This is something you'd want to make sure you have resolved before you refinance so that you can get into a standard conforming loan easily.

m2c · Joined: 03 Aug 2005 Posts: 764

I’m going to guess that you’re being hustled for a refinance by the same LO used before. In California, churning seems to be the dish de jour. Lacking the crooked appraiser, a FHA streamline refinance is likely what’s being dangled in front of you.

LO make what they make but if you closed recently at 5.75% (30-eary fixed) you have one happy LO. If he or she wants to churn you, the LO can come back to the trough one more time and make a couple grand by refinancing you at 5.5% FHA. He or she would be willing to do it for a lot less money the second time since it’s icing on the cake and a lot less work is involved.

Would it be worth it for you? No, I just don’t see how the numbers are going to dance for anybody except the LO.

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Yeah, it's the lower income scale and it was my first home. Credit is outstanding I only have $315 worth of credit card debt and no car note. The only thing i worry about is the Mortgage. My fico is 735 and my girlfriends is 789. I will look into refinancing with Countrywide home loans when i hit the 80% mark.

m2c · Joined: 03 Aug 2005 Posts: 764

Wow! You must have blow their socks off with that FICO on a FHA.

Debt structure looks good but with $315 (I assume PER MONTH, not total debt), I'd chip away there rather than make extra principal payments.

80% LTV is not necessarily a magic number. Many 85% LTV conventional no MI programs out there. Usually a 1/2 discount point "hit" or equivalent in rate. Even some MI is not a horrible idea. With those FICOs, you'd qaulify for discounts on MI rate.

Still you are going to have to wait -- build equity through principal reduction and/or property appreciation.

Also, I'd get at least one other quote, i.e., not just Countrywide.

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

No, that's my total debt $315. This is on one card and i have three others with $0 balances. I payed all my credit cards off one year before making my home purchase, but back then my total credit card debt for all cards was $1300. I hate to owe people and would rather pay cash. So what im saying is, the cash that most people shell out for credit card debt, i plan on putting towards the principal of my home. The thing is i didn't have the 20% to put down and this godamn pmi is pissing my off( $800 annually) this could go towards the principal.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Countrywide, the company that helped that guy b uy millions of dollars in real estate in AZ with a 30,000 income. Good choice.

dsickler · Posted: Sat Aug 13, 2005 4:17 pm Post subject:

m2c wrote: ...Debt structure looks good but with $315 (I assume PER MONTH, not total debt), I'd chip away there rather than make extra principal payments.

Do what he said. think about it: A credit cards is just like a loan. So you have two loans. one for your house at 5.75 which is most likely tax deductible, and one for your credit cards at what percent? anywhere from 0% intro rate upto 17% apr? and it's probably not tax deductible. So by sending that extra $100 to the mortgage instead of the credit card, you are paying off the cheaper loan quicker and stretching out the more expensive loan, when in reality, you should be doing the opposite. This is a perfect example of when you should evaluate between preferred debt, the mortgage, and non-preferred debt, your credit card.

David

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

I only have $315 dollar balance on my credit card. I could pay this off today if i wanted to. Im just maintaining revolving credit with this card.

chow · Posted: Sat Aug 13, 2005 9:56 pm Post subject:

Pay off the crdit card montly, quit wasting your money on a high APR credit card. You can still use it, but why carry a balance and pay them the high rate just to carry a balance? They will report your balance at the beginning of every month-anyway. You carry a car, and a mortgage long term, and that's a better use of your money.