Flood insurance issue on existing mortgage (PMI, loan, interest rate, 401k)

[boswell2k1]

Hi,

I have a home that I have lived in for 7.5 years. We recently placed our home on the market for sale, found an interested buyer, and started the contractual period. The buyers lender found that we are in a flood zone, whereas my paperwork from originating loan and refinanced loan states I am not. It appears that a new act signed in 2012 trumps my paperwork. Naturally, the buyers backed out. There are creeks in my neighborhood, I do not live near a large body of water. I'm looking for my best option. I have 26 years left on my existing mortgage at 5.25%, and owe 105,000 of an original $117,000 mortgage. I was planning to take about $25,000 that I was going to use for a down payment on a new home and pay down my mortgage. Is this something my bank would allow? Would this be a better solution than refinancing at 3.25% for 15 years AND carrying flood insurance? I'm looking to over pay and have the home paid off in 10 years. It's a sticky situation but I think I can eventually get out of it. I'm only 30, good career, looking for a way to improve my situation.

Thanks!

[EdCampbell]

If you think you are out of the flood plain you can dispute the issue. See link below.

https://msc.fema.gov/webapp/wcs/stor...owners/Renters

Check the flood map here to make sure your home is listed on the map.

https://www.floodsmart.gov/floodsmart/

if you are still wanting to sell the house the buyer should be able to get flood insurance if they have to or if they desire the house enough. You can explain how only a portion of the property is in a flood zone, usually on larger properties with small streams.

Refi to a 15yr is a great option if you are in a house you love.

Or you can rent it out and buy a new home as long as you qualify with both housing payments.

Good luck

[boswell2k1]

Thanks for the reply. I checked the map and it's the same map that my mortgage and refi were checked again, as well as the buyers certificate. It touches a corner of an easement, and my understanding of the new law is that this now requires flood insurance.

I'm more looking for clarity of whether to pay down my current 30 year at 5.25% with a large sum of money or to refi at 15 years at 3.25%, and carry flood insurance. I would like to pay this home off in 10 years. If i can do it just as easily without refinancing I would like to, but I'm not sure if it's a better option, even with carrying flood insurance.

[Modification Specialist]

Originally Posted by boswell2k1

... I'm looking to over pay and have the home paid off in 10 years. It's a sticky situation but I think I can eventually get out of it. I'm only 30, good career, looking for a way to improve my situation....Thanks!

My advice is to stay where are!

I do not recommend refinancing because it will make your payment really go up from what you are paying now.

Mentioning flood insurance and the Flood Insurance Act of 2012. I am willing to bet your you live on the east coast, possible New Jersey since they got the worst of Hurricanes Katrina and Sandy - Trying to sell your home is going to be harder, because buyers or not going to want to pay mandatory extras.

Because you were "Grand Fathered" in before the FEMA flood insurance policy change. Try to refinance into a new loan will most likely increase your payment up to 20% more because of the new flood guidelines.

You don't mention the current value, price, what your down payment was when you brought your home, or what your current taxes and HO Insurance (escrows) payments are. You mention the interest rate of 5.25%, which at the time 7 to 8 years ago was a good rate. You’re also not mentioning paying PMI or MIP, which leads me to think you put at least 20% upfront for the down payment, having a conventional mortgage.

Reviewing your situation at 7.5 years (90 months) into your current loan?

• Original term 360 months (30 years)
• Original mortgage balance $117,000
• Your interest rate 5.25%
• Equals P&I payment = $646
• Current balance $105,000 indicates payment closer to payment number 75
• Estimating your equity $105,000 + the $25,000 (you mention for a down payment on a new loan.
• Looking at current balance $115,000 and the estimated down payment of 20%.
• Estimating the purchase price was around $145 to $150K.
• I am sure you understand equity, cannot base what the purchase price was, you’re going to need to see what your current value is.
• If your value is higher than $138,000, you stand a good choice of getting a rate near 3.6% (Wells Fargo Rates 3/3/14)

1. Changing lenders estimating a new 15 year loan (with 5% closing costs) - $110,250 x 180mths x 3.6% = $790 P/I.
2. Doing a Stream refinance into a new 15 year loan (with no closing costs) $105,000 x 180mths x 3.6% = $753 P/I

As Tony Soprano said "Forget about it"...

Originally Posted by boswell2k1

... looking for a way to improve my situation....

Credit is Queen! Sending extra into your mortgage payment towards principle is good. This pays down the mortgage balance faster, and reduces the net effective interest rate 2%. You are rewarded by a higher credit FICA, being reported to the credit bureaus as being more responsible. (noting your not going to have the same effect if you pay extra in the begining, compeared to paying extra later.) Having good credit will 100% determine how much your going to pay in life.

Education is King!! School is good, it teaches you a thinking skills or teach a trade to go out to the world to get a job (working for someone else). But it teaches very little entrepuer skills to make money on your own.

Timing is the Ace of Spades!!! This involves knowing and setting a personal goals From this, one could make a list of things or tasks to accomplish for a specific time. Another name for this is planning or prioritizing by creating a list. The task that is of highest importance should be the first one in the list. Writing an action plan would be helpful in making sure all the tasks are accomplished. Small steps first, bigger steps later. You schedule in a weekly or on a monthly basis.

The Game of Life??? Where do you see yourself in your future to take advanctage of "Opportunitnies?" One fact that is 100% correct, is your getting older. As a person ages there will be less opporunities, especialy to earn income. If I was your age again and knowing what I know now - would seek to invest in myself by learning the above but also understanding the different types of money and how it is earned.

1. Earned income - from working.
2. Rental Income - in todays world the idea of getting rich is restate is an outlived idea.
3. Investment Income - from savings.
4. Portfolio Income - mutual funds (Tax-free Municipalities,) I recommend these more than a 401K.
5. Residual income - revenue from work done. This is what many seek to maximize, the problem with this was for a one time action / job. That will eventally die.
6. Passive income - is money for life, setting up individual partnerships done through networking. Warren Buffet got rich through networking, which lead him to build his impire. This is what I do now. (Just imagine doing something like this at your age..?)

In closing the last 14 years+ have spoken with people that were either of looking to pay less, or save what they have. All at differnt ages, starting with an organized plan and went forward. Contary (many) others did not have plans, lost or had to paymore.....a topic for another post...

Sorry went way overbroad, good luck on your future endeavors.

[EdCampbell]

Originally Posted by Modification Specialist

My advice is to stay where are!

I do not recommend refinancing because it will make your payment really go up from what you are paying now.

Sometimes its not about payment, and jumping into a 15 from what he has could be close to the same.

[LegalDiva]

This is a personal decision only you can make, OP, but my hunch is to not refinance because you will have to live in the home X number of years to break even on closing costs, etc. There never really is no such thing as a "no cost" refinance closing.,you will pay money for it, either upfront (appraisal, app fee, etc) or the back end (at closing, paying points to buy down the rate, etc).

I am in your situation, when my husband bought our current home in NY (south shore) the house was NOT in a flood zone. We were flooded after Irene and Sandy, and FEMA remapped our area in 2012 and now we are in a flood zone. We arent that close to the water, maybe 2 blocks away and our house is a good 3 feet above street level yet FEMA has destroyed our chances of selling our home quickly as most buyers refuse to look at homes in flood zones due to increased premiums.

I hate to be so negative but staying put may be your only recourse unless you are willing to rent your home until you can find a buyer..(and being a landlord is a whole different can of worms). My husband and I met with many realtors eager to list our house for sale who conveniently did not want to highlight the fact that we are in a flood zone and even met w one that outrageously told us to not disclose it at all because its the Buyers responsibility to know it before they signed a contract..we do not want to deal with a buyer who backs out of a contract once they discover the flood zone issue..so we plan to disclose early, even if it means the house is on the market for a year or more..,but unfortunately this is the new reality UNLESS Congress does something about the Biggert Waters Act (which is the law that made flood insurance rates skyrocket for all homeowners on coastal areas after 2012).

[Snafu]

It is worth investigating the FEMA site already posted to see if you can dispute your home's flood area designation. No matter that you have creeks in your area, it is the elevation of your individual property (i.e. dwelling) that will be key. (hire a surveyor to do this very easily). I hit this same snag when refinancing and was able to secure a LOMA (Letter of Map Amendment) for my home and garage, although it took a couple months to navigate the process. There should be a BFE (Base Flood Elevation) set for each vicinity of bodies of water - and as long as the bottom level of your dwelling is "at or above" that specified base flood elevation, you can appeal the ruling. Even if you then determine you may want flood insurance, it would NOT be based on a dwelling within a flood plain and be much more reasonable. In the time since I navigated this process, more than 100 other homes in my town have successfully managed to get the exemptions. I filed the ruling with the county records just to have it documented for any future issues that may come up.

[SmartMoney]

Originally Posted by Snafu

It is worth investigating the FEMA site already posted to see if you can dispute your home's flood area designation. No matter that you have creeks in your area, it is the elevation of your individual property (i.e. dwelling) that will be key. (hire a surveyor to do this very easily). I hit this same snag when refinancing and was able to secure a LOMA (Letter of Map Amendment) for my home and garage, although it took a couple months to navigate the process. There should be a BFE (Base Flood Elevation) set for each vicinity of bodies of water - and as long as the bottom level of your dwelling is "at or above" that specified base flood elevation, you can appeal the ruling. Even if you then determine you may want flood insurance, it would NOT be based on a dwelling within a flood plain and be much more reasonable. In the time since I navigated this process, more than 100 other homes in my town have successfully managed to get the exemptions. I filed the ruling with the county records just to have it documented for any future issues that may come up.

This is exactly what you wish to do.

Also, the fact your current lender doesn't know about the flood insurance doesn't mean they couldn't require it in 6 months. Then you would be at 5.25% and with flood coverage. Read this post, get an elevation cert and apply for a LOMA.

Get up close and personal with the FEMA site. Understand the process.