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We just closed on our house in June of this year with a 30 year fixed at 6.125% Purchase price was $259,000-we put $13,000 down, resulting in a total loan of $246,000. I believe we now owe about $244,000. Our payments are $2240 a month with PMI and New Jersey property taxes. This is our first home and we plan to make major renovations to it (right now it's just a hum drum ranch) and will be staying at least 8 years, probably 10. Given all of that, should we eventually look into refinancing? Can we?
At our closing we must have signed at least 10 different forms saying that we would not sell the house in less than a year (our mortgage has been sold twice since then ), so does that preclude us from refinancing as well? If not, is it worth it for us to refinance at the current rates, or should we wait?
Finally, it's my understanding that refinancing is kind of like buying the house all over again in terms of the closing. That being said, I'm assuming that they'll once again look at our income, credit, etc...? We have more credit card debt now than we did simply because we've started renovating the home. Both of our incomes are steadily rising and our jobs are secure, so we weren't worried about taking it on for the short term, but I realize that it might make a bank nervous. Any advice?
It depends on what rate they offer you... not what rate you think you should get... those are two different things altogether... personally, I think I should get a 1.0% rate... I ain't getting it... you need to present more information otherwise nobody can help you... one bank will give you a rate of 5.5% and another will give you 5.2%... what rate you get is dependent on how hard you look... and nobody knows how hard you are going to look and what banks are going to offer you.... you have to find that out yourself before anyone can help you...
We just closed on our house in June of this year with a 30 year fixed at 6.125% Purchase price was $259,000-we put $13,000 down, resulting in a total loan of $246,000. I believe we now owe about $244,000. Our payments are $2240 a month with PMI and New Jersey property taxes. This is our first home and we plan to make major renovations to it (right now it's just a hum drum ranch) and will be staying at least 8 years, probably 10. Given all of that, should we eventually look into refinancing? Can we?
At our closing we must have signed at least 10 different forms saying that we would not sell the house in less than a year (our mortgage has been sold twice since then ), so does that preclude us from refinancing as well? If not, is it worth it for us to refinance at the current rates, or should we wait?
Finally, it's my understanding that refinancing is kind of like buying the house all over again in terms of the closing. That being said, I'm assuming that they'll once again look at our income, credit, etc...? We have more credit card debt now than we did simply because we've started renovating the home. Both of our incomes are steadily rising and our jobs are secure, so we weren't worried about taking it on for the short term, but I realize that it might make a bank nervous. Any advice?
Yes, you should LOOK at refinancing. Rates are coming down, you have a relatively large balance and plan on being in the house for a significant time. Very hard to say when rates will bottom, but it probably a good target to look for something that would be about 5%. Even if you were to refi at 5.25% you'd saving over $144 a month. With closing of $3000 dollars you'd be money ahead in about 20 months.
Technically a sale is not a refi, some lenders have a specific pre-payment penalties, but you should check. My gut tells me rates will probably stay low for most of Q2, so that you might be OK to wait, but review all the terms beforehand.
Ideally you could refinance in such a way to eliminate the PMI, that would be a big savings.
If you are stuck with the PMI you should consider accelerating your payments to build equity more quickly to save that.
The details of your credit card debt are VERY important. If your payments are still very timely and you have not maxed the cards out or gone crazy with the 'store account' and their "intrest free periods" your FICO score may be everybit as good as when you bought the place.
Best advice: start talking to lenders NOW. Some will be eager to get your info and pre-qualfiy you. That should be fine until you know the details of the terms of your loan. Once you determine if there is pre-payment penalty ( gut says no...) you can concentrate on rates and fees. A good loan officer can call you regularly and when you feel comfortable with a rate low enough to make the savings /pay back work you can lock...
On note on the renovations -- you may want to think about the schedule you have to start those, and the way you'd finance them. If it was me I think I might try and build up some equity and then use a HELOC, alternatively you could do a cash out refi, but as you equity is already under 10% you are not in great shaoe to do that...
Yes, you should LOOK at refinancing. Rates are coming down, you have a relatively large balance and plan on being in the house for a significant time. Very hard to say when rates will bottom, but it probably a good target to look for something that would be about 5%. Even if you were to refi at 5.25% you'd saving over $144 a month. With closing of $3000 dollars you'd be money ahead in about 20 months.
That was exactly what I was looking for-I thought that was basically how it worked (comparing closing to savings per month) but I wasn't sure.
Quote:
Originally Posted by chet everett
Technically a sale is not a refi, some lenders have a specific pre-payment penalties, but you should check. My gut tells me rates will probably stay low for most of Q2, so that you might be OK to wait, but review all the terms beforehand.
Will do.
Quote:
Originally Posted by chet everett
Ideally you could refinance in such a way to eliminate the PMI, that would be a big savings.
Since we're basically about $37,000 in equity away from PMI how would one do that? PMI is about $150 a month so that would be AWESOME.
Quote:
Originally Posted by chet everett
The details of your credit card debt are VERY important. If your payments are still very timely and you have not maxed the cards out or gone crazy with the 'store account' and their "intrest free periods" your FICO score may be everybit as good as when you bought the place.
Gotcha. The cards are not maxed, but the balances are probably higher than the bank would like. Everything else (no overlimit/late payments, etc...) is good though. So our focus should be to pay them down, then look into the re-fi.
Quote:
Originally Posted by chet everett
Best advice: start talking to lenders NOW. Some will be eager to get your info and pre-qualfiy you. That should be fine until you know the details of the terms of your loan. Once you determine if there is pre-payment penalty ( gut says no...) you can concentrate on rates and fees. A good loan officer can call you regularly and when you feel comfortable with a rate low enough to make the savings /pay back work you can lock...
I was thinking of going back to our original lender (Arlington Capital). They mostly originate mortgages and immediately sell them, but they hold some too. They were the most stress free part of our home-buying process and I'd recommend them to anyone. Any reason not to?
I have no experience with Arlington Capital, it is possible that they are as good as you remember, but it is also possible that they are completely different -- unprecedented disruption in the mortgage business these days...
Not sure if there is a way out from under PMI in your situation -- if you equity was 10% and you had a second for 10% that would reduce meet the requirement for the non-PMI first to be 80%, though typically is structure at purchase, not refi, and local restrictions may preclude. Other sources of non-PMI loans are VA, and lender-paid PMI. Explore all the options, but with a largish loan balance the ruling factor is almost certainly intrest rate.
Actually, this is one case you may want to avoid returning to the original lender. REASON: a little known agreement between the lender and investor, called a "buyback" agreement. If for any reason a loan is paid off in 120 to 180 days (varies) via a refinance, the lender must repay the investor the fees they earned the first time around. Now, take it a step further, some agreements even expand to anytime a loan is paid off (refi or sale) in the first 6 months, that money must be paid back, even if the first originating lender was not involved.
It would be real easy for that very same loan officer to advise you "it's not quite time yet, but we should watch it." Mysteriously, once the required time has passed, it will be time. Another case of what is in your best interest is not being considered.
Rates should be low enough soon--but, no guarantee to look at refinancing. While the rates may OK, the problem is getting PMI again. Not sure where you live, but Hogh Brdge in Burlington County and High Bridge in Hunterdon County are both in declining market areas. Probably were not when you closed. If they were you would have been required to put 10% down, not 5%, except as first time homebuyer one PMI did 5% down for first time buyers.
Costs are lees than purcgase but still about $7,000. If you add that to present balance of $244,000 so you pay nothing out of pocket the apprasie value would have to be $265,300--more than your purchase price and not likely in this market. Even then, at 95% of value not likely you would get PMI again.
Rate would have to be 5.00% to break even on costs in 24 months--kind of the golden rule to refinance.
While may not be impossible it looks rather unlikely even though rates may hit 5%
We just closed on our house in June of this year with a 30 year fixed at 6.125% Purchase price was $259,000-we put $13,000 down, resulting in a total loan of $246,000. I believe we now owe about $244,000. Our payments are $2240 a month with PMI and New Jersey property taxes. This is our first home and we plan to make major renovations to it (right now it's just a hum drum ranch) and will be staying at least 8 years, probably 10. Given all of that, should we eventually look into refinancing? Can we?
At our closing we must have signed at least 10 different forms saying that we would not sell the house in less than a year (our mortgage has been sold twice since then ), so does that preclude us from refinancing as well? If not, is it worth it for us to refinance at the current rates, or should we wait?
Finally, it's my understanding that refinancing is kind of like buying the house all over again in terms of the closing. That being said, I'm assuming that they'll once again look at our income, credit, etc...? We have more credit card debt now than we did simply because we've started renovating the home. Both of our incomes are steadily rising and our jobs are secure, so we weren't worried about taking it on for the short term, but I realize that it might make a bank nervous. Any advice?
if your remodeling now, wait until you are done so you can get a MUCH better rate, and use your new equity to cover the costs of refi. you will get more bang for your buck. not to mention you can eliminate your PMI with enough of your equity put back in.
right now is a great time to refi though, but it will get better. everyone keeps chanting that mantra like it's some kind of prophecy. if i were you, remodel as much as possible now, wait until at least april, see what happens with the markets and refi. no one will be able to predict what is going to happen next year, but i have a very positive view of it, at least for homeowners and investors. now for the whole economic outlook, i wouldn't quit your day jobs just yet.
as far as i understand it, you can refinance whenever you want, and if the conditions are ripe, go for it. i have never had to sign those forms you are talking about so i cannot say whether you are legally allowed to or not.
Last edited by michael11747; 01-01-2009 at 01:15 PM..
Reason: more info
At our closing we must have signed at least 10 different forms saying that we would not sell the house in less than a year (our mortgage has been sold twice since then ), so does that preclude us from refinancing as well? If not, is it worth it for us to refinance at the current rates, or should we wait?
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), so does that preclude us from refinancing as well? If not, is it worth it for us to refinance at the current rates, or should we wait? 
Lots of good questions -- NOT a dummy!
, at least for homeowners and investors. now for the whole economic outlook, i wouldn't quit your day jobs just yet.
