To refinance or not to refinance, that is the question.... (PMI, loan)

[springbean]

I would love some help If it's not already obvious I am completely confused

Here's our situation:
Purchased our home in Austin, TX for $256,000 current value is around $270,000 in 7/2006
1st mortgage
Balance: 200,000
Rate: 6.5% Fixed
Current Payment: $1492
2nd Mortgage
Balance: $25,000
Rate: 8.25% FRHEL W/15 Year Balloon
Current Payment: $190

I would love ANY and ALL advice. Should we refinance at all? The 1st mortgage? The 2nd? Both? What kind of rate should I be looking for? What about points? Consolidation with credit card debt? Ugh...I just don;t know

Thanks!

[jeffselan]

If it were me, I would refinance my first and second. You are looking at around 6.5%.

You can buy down the rate with a point, but keep in mind, you really have to see the value in the long term. In other words, with the difference in payment between a point and no points, look and see how long it will take you to pay that point off.

If you plan on being in the home less than that amount of time, the point will not be worth it.

The trick is to refinance to a rate you feel comfortable with. Some persons will tell you that paying points is a bad thing because of the cost.

The real bad thing is refinancing your home every 5 or so years chasing the next rate decrease with thousands of dollars in added fees and interest.

If you look to refinance, have a lender structure a loan you know will work for you, hopefully forever.

[renriq02]

6.5%???

Does the borrower have a bad credit score?

With a prime score ...the rate will be 6.125% at the highest with LPMI

If it was FHA...the rates will be in the high 5's

Originally Posted by jeffselan

If it were me, I would refinance my first and second. You are looking at around 6.5%.

You can buy down the rate with a point, but keep in mind, you really have to see the value in the long term. In other words, with the difference in payment between a point and no points, look and see how long it will take you to pay that point off.

If you plan on being in the home less than that amount of time, the point will not be worth it.

The trick is to refinance to a rate you feel comfortable with. Some persons will tell you that paying points is a bad thing because of the cost.

The real bad thing is refinancing your home every 5 or so years chasing the next rate decrease with thousands of dollars in added fees and interest.

If you look to refinance, have a lender structure a loan you know will work for you, hopefully forever.

[LaceyEx]

Keeping your rate at even 6.5% and consolidating 1st & 2nd-your new paymen would be $1422.15 a mo. You are at 83% LTV and don't know what most lender's look at these days as far as that goes. If you do it you would have minimal PMI.

[springbean]

We have excellent credit and we don't have an FHA loan. We plan on being in our home for at least another 5-7 years, probably longer.

Are we all in agreement that we should refinance? And consolidate? Is that how it works, we roll the 2 mortgages into 1 with the same (or lower) rate? Why would PMI even be an issue? We would have at least 20% equity in the home. This is the 3rd house we've owned, you'd think we'd get the hang of this by now

[jeffselan]

Spring:

Again, if it were me, I would look to refinance. But again, you want to be in a loan that is so good, you never want to refinance again. As for the about 6.5% vs 6.125%, I give conservative estimates as to not disappoint people. The rate thing is a game we lenders like to play. If I would have said 4.5%, someone would likely has said " What!, 4.5%, that's horrible! I can do 4.25%!" The bottom line is this, Do your homework, talk to 3 lenders at a minimum. I always suggest your local banker, a broker, and a retail lender. Examples: Countrywide, WAMU, Bank of America or others. Someone that lends for mortgages but does not have a bank in your state. That way you can compare apples to apples and find someone with whom you feel confortable and trust. Do not let a bunch of lenders pull your credit, just ask them to send you a good faith estimate based on the information you give them. Don't be afraid to ask questions and maybe consider different term options. I would stay away from an ARM if you don't know how long you will be in the home.

[LaceyEx]

If you owe $225 and your home appraises at $270K - you're at 83.3 LTV.

[renriq02]

Lenders are not required by Federal Law to send a good faith estimate w/out credit being pulled. The RESPA documents will need to have liabilities filled out to give a more accurate approval. Imagine asking for a roof estimate, and not allowing the contractor to view your roof. Imagine asking for an estimate on car repairs, and not allowing the mechanic to view the engine!

FICO allows mortgage lenders to pull your credit within a 30day span, and only counting as 1 pull.


Freddie Mac's Homepage it showing that last week's rate was at 5.72% with 0.4 in points. That is a HUGE difference from 6.5%.
6.125% would be with LPMI.
If the borrower were to pay PMI then the rate will be 5.875% and lower.....
Most lenders will charge 1 origination fee for this...but 6.125% will be with no points.

If I gave someone 6.5%...then I would be paying for a full family trip to Hawaaii.

My suggestion is to pay the PMI...and making extra principal payments to finally take off the PMI. This way you wont have to worry about refinancing to take out the PMI.

Originally Posted by jeffselan

Spring:

Again, if it were me, I would look to refinance. But again, you want to be in a loan that is so good, you never want to refinance again. As for the about 6.5% vs 6.125%, I give conservative estimates as to not disappoint people. The rate thing is a game we lenders like to play. If I would have said 4.5%, someone would likely has said " What!, 4.5%, that's horrible! I can do 4.25%!" The bottom line is this, Do your homework, talk to 3 lenders at a minimum. I always suggest your local banker, a broker, and a retail lender. Examples: Countrywide, WAMU, Bank of America or others. Someone that lends for mortgages but does not have a bank in your state. That way you can compare apples to apples and find someone with whom you feel confortable and trust. Do not let a bunch of lenders pull your credit, just ask them to send you a good faith estimate based on the information you give them. Don't be afraid to ask questions and maybe consider different term options. I would stay away from an ARM if you don't know how long you will be in the home.

[jeffselan]

I think we all agree, some type of refinance would be good for you to look at.

Rates change daily and are predicted to bump up a couple more times before they settle. Please do your best to look at several different lenders but beware of any that won't at least give you an estimate of loan costs and fees.

Perhaps you might want to talk to the other gentleman, he seems to have some of the best rates in town.

[DasNootz]

Okay... here's my take on your scenario.

Currently you owe $225,000 with monthly payments of $1,682.

Add in closing costs for a refinance ($3k+/-) and you'll owe $228k. To qualify for 20% down, your home would have to appraise at $285k (Total debt / .80)
We'll assume that it appraises for more than $285k so that you can avoid PMI (you know your market better than I do). At 6.125%APR, your total monthly payment would be $1,378.32, not including taxes or insurance.

Thus refinancing would decrease your monthly payment $304+/- each month. If you paid the same payment as you do now ($1682) you'd pay down your added debt ($3,000 in closing costs) in less than one year, and be swimming in pure profit this time next year.

Now for points. According to Countrywide's website, today's rate for Austin Texas with 20% down is 5.875% with 2 points. Those two points will cost you $4,560 +/-. Add that to your closing costs, and you're looking at a notal new debt of $232,560. At 5.875% your monthly payment would be $1368.86. Your home would also have to appraise out at $291k to avoid PMI. In this case it's not worth it if you're comparing 6.125% without points to 5.875% with 2 points.

I'd also agree with renriq02... if your home doesn't appraiser for $285k, I'd pay the PMI and sock away extra payments until you built up 20% equity.