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I was excited when I read about the increase in "jumbo" levels, because we are just about ready to close on a purchase where we were taking a conforming loan at the maximum level ($625,500 was the level for Kauai) and a second of $70K as a "bridge loan" until we sell one of our houses here in NY. Now they've raised the limit to something over $770K, so I thought, yeah! we don't need to do two loans.
But then I thought again. The 625.5 is at 5.375% (5/1 ARM), with one point (ugh! I hate points), and the 70K is at 5.875%, interest only. We have three houses to sell and one will probably sell soon, so we figure we will pay off the $70K then, most likely within a year.
If we roll the $70K into the big loan (which we can do), we do get the better interest rate on those funds, but it's not THAT much better. AND we pay $700 more for the point. AND our payments actually go up, overall, because now we're paying principal on the $70K. (Which isn't bad in the long run, always better to be paying down principal, but won't help our cash situation as we get established in a new place.) Also, unless we refinance, our payments won't go down when we pay down the principal on one big loan, whereas if we pay off a second mortgage, we can then apply as much or little of that payment to the first, at our choosing. More flexibility.
SO, I think we have decided NOT to try to change over to one big (but not "jumbo") mortgage. Anyone see anything wrong with this reasoning? Is there any good reason to avoid having two mortgages as outlined, in our situation? TIA!
You have more flexibility if you break it into two loans instead of one loan (since you probably cannot have the one loan recast after prepaying a big chunk), but you might be looking at more closing costs with the two loans. Are you planning on refinancing the 5/1 ARM or selling within the 5 years?
Probably refinancing, though we *could* end up selling and buying a different place (maybe smaller; one child will be off to college and my mom might not be with us anymore). Our plans are really not solid that far into the future, at this point.
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