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First mortgage we owe $230,000.00, it's a 5% 30-year fixed. With taxes and insurance, our first mortgage is $2,180.00 per month. Our second mortgage (which has been refi'd twice) is interest only (point under prime, interest only for 10 years and then amortize loan begins for additional 10 years) with a balance of $165,000.00. Our payment is a measly $290.00 a month right now, but afraid it's gonna sky rocket. Our house would probably appraise between $420,000.00 and $500,000.00.
Our biggest concern is the second mortgage. We don't qualify to refi just our second. Not sure if combining the two mortgages is a good idea. We had someone (broker) give us a refi FHA mortgage quote with a rate of 4.75% (combining both). Closing costs would be around $7,000.00. We plan on staying in the house for at least 15 more years. Our new payment (including taxes, homeowners insurance and FHA insurance) would be around $3,000.00.
We're looking for security. The second loan is sweet right now, but could turn into a nightmare. We're looking for some good advice...
ADD: I should add that my question is, should we refi.? We have 22 years left on our first mortgage. Combining both would put us back at square one, but would give us some security.
If you can afford $3000 per month why not just pay an extra $530 on the second mortgage every month that way your principal will go down too. I wouldn't refinance the first paying $7000 in closing costs just to lower the rate 1/4%.
You are afraid your payment is going to skyrocket but have you done the numbers? Would it be higher than $820 which you seem to be able to afford? Who told you you do not qualify to refinance just the second? Was it the same person that wants to sell you the 5%, $7000 cc loan?
thanks for replying. I can afford to pay an extra $500 on the second now, my fear is that when prime increases, my loan (on my second) will increase to $1000,00 and greater (of that, I'd be paying interest only). At that point, we'll have no wiggle room for emergencies. My hours have been cut and my husbands pay has been decreased in the past year. That's part of the reason I have so much fear regarding my second. When we initially took out the loan to do upgrades on the house, "life was good". Then, of course, the economy took a nose dive. Just trying to set us up so that in the worst case sencerio we can make our monthly payments. I hate touching my first, I love the rate. Lessoned learned, here, about taking out a second mortgage. I don't think I'll ever do it again. thanks for your time and help!
One issue is when you refi the first mortgage the 2nd mortgage now goes into 1st position.
That means your new 1st mortgage is now in 2nd position which no bank will accept .
I tried to refi my 1st mortgage and leave the small 2nd alone and found out the 2nd mortgage company would have to agree to subrogate(agree to go to 2nd position , which is where they already are).
I read that it was going to be a fiasco and it sure was.
Typical large corp BS.
You have to e-mail them a request and it could take 2-3 months for an answer.
Can you believe this process even if I want to refi with the same company that holds the 2nd mortgage ?
Damn if it was a small bank it would happen in a week.
One other point is , if your LTV is greater than 80% you won't be able to refi without paying a monthly mortgage insurance premium along with a big up front premium (which can be financed)
Leave the 1st alone and pay down the 2nd as aggressively as you can with your extra $500. If your rate went up 4% your minimum payment would go up $550. I don't see prime going up 4% in the next few years so sit tight.
1st off you should not be asked to do anything- your broker or lender takles care of it all.
Yes, you do have to request the subordination as you said and it is to remain in 2nd lien position. It is not a fiasco or typical corporate BS.
The 2nd mortgage holder is basically reunderwriting you to re affirm that you have sufficient income, payment history, credit score and equity in the property as well as wanting to see the terms of your potential refinance to document that you are getting a better loan.
This takes approximately 1-2 weeks not 2-3 months(though some smaller banks were at the peak of refinancing last spring).
Most banks also charge an upfront fee to look at the request- typically anywhere from $125- $175 so be prepared to pay this as well.
The challenge and "scary" part about this is there are no guidelines to reference. It is done on a case by case basis so no one can tell you your preapproved.
thank you dad2jules...I've been leaning in that direction.
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