Is it possible to refi into lower rate for upside down property? (PMI, loan officer)
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Hello,
My apologies firstly if this topic was previously asked before.... my home value is under water, and the local banks I am speaking with simply say the LTV does not permit me to refi.
I would like to get into a lower rate (to save some money for my child's pre-school fees) but I am not sure if my lender Citibank will let me refi into a lower rate without an appraisal, after all why would they want to do that anyways and lose profit?
My situation:
ARM 5/1 @ 5.875%, mortgage balance $550k, 2.5 years more to go.
Home purchased in June 2007 for $712k, with 20% down. I don't pay PMI for my monthly repayments.
2010 County Assessor's valuation is $550k which is quite accurate for properties in my area.
The loan is with Citimortgage and is not owned by Fanny/Freddie.
I looked at the Obama loan modification plan but I don't fall into any category, and the Obama refi plan sounds like there is PMI costs added on. Our situation is such that we may soon begin to experience some hardship since we will need to pay for my child's pre-school fees @ $16k/yr.
What are my options?
Thanks in advance.
Last edited by me4tux; 02-21-2010 at 01:17 AM..
Reason: minor edits
There are lots of folks out there with MUCH worse rates than 5.875%, realistically if you would like to modify your loan into a fixed rate instead of the variable that MAY be a smart thing to do, as I would think the lender is willing to give up the possibility of rate increase on the ARM to lock in a still pretty good return. Many lenders will do modification w/o and appraisal. Have you talked to your current lender???
A modification is NOT a refi, and lenders are often much more willing to alter the terms than to start fresh, the risk profile that they have when they merely alter the term (or even reduce the rate a bit) is far different than than having to admit that a newly created loan is essentially 100% financing.
My suggestion is to lay it out for Citibank people in a clear manner: You are more than willing to continue to pay a fair amount for your mortgage. You just want the lender to be realistic about rate / terms. Right now an ARM would likely be available for much less than you are paying, and even a fixed rate would be unlikley to be as high as you are paying {unless your FICO is particularly crappy...} SO the lender MIGHT able to work with you.
The advice from d2j may be useful -- the government programs may allow to you to refi despite having no/negative equity. Again the key is
First of all, I don't think you will receive any financial assistance if your loan interest/principal/taxes etc do not exceed more than 31% of your income.
My mother was in a similar situation. She put down 20% (120K) cash on a 600K property in 2005 at an ARM at 5.25% that would reset in 2010. The property was now appraised for 525K during the refinance.
What were her options?
1. Just keep the ARM and risk it when it resets (with the Libor rates and the 1 year treasury rate,) most ARMs resetting won't go up, in fact it will go down. In your case, your ARM won't reset for 2 more years and 5.8% is not a bad rate.
2. Pay down the loan to 420K. (she owed around $450K on the mortgage currently).
She makes 6 figures and her loan was through fannie/freddie. Obviously they rejected her request for refinancing help. (She's lives in the DC area and fannie/freddie's loan limits are financed up to 727K so she wasn't in jumbo loan terrority).
In the end, the kids just paid down her 30K difference and she refinanced at 420K to get to the 20% threshold.
So to the OP, how much is your monthly income ratio to your mortgage? That's what the lenders want to know. If you make too much, I don't think they will give you any help (like my mom's case). In your case, it doesn't appear that you are in any financial straits.
Also think long and hard. I know parents always want the best for the children in terms of schooling. But preschool costing more than $16K a year? That's a lot of money.
Yeah if you have a Fannie/Freddie Loan you can qualify for the Making Homes Affordable refinance, which is specifically for borrowers who are upside down. For more details click here Making Home Affordable - Home
My suggestion is to lay it out for Citibank people in a clear manner: You are more than willing to continue to pay a fair amount for your mortgage. You just want the lender to be realistic about rate / terms. Right now an ARM would likely be available for much less than you are paying, and even a fixed rate would be unlikley to be as high as you are paying {unless your FICO is particularly crappy...} SO the lender MIGHT able to work with you.
The advice from d2j may be useful -- the government programs may allow to you to refi despite having no/negative equity. Again the key is
Many thanks to those that replied.
@dad2jules: I checked with the resources, and my loan is not with Freddie/Fanny. :-(
@chet: Thanks for that idea. My FICO is about 820. It does sounds like it is really up to a senior level manager if he/she is willing to help out. However, I don't think speaking to a regular loan officer will yield any positive result even with a good FICO. So, how do I get in touch directly with a much senior loan manager who is empowered to make "out-of-the- norm" decisions? Do you know of any cases where this has worked out? Is there a thread on this forum of someone actually having some level of success? Thanks.
@aneftp: Thanks, but I had your 2 suggestions in my head before I posted. I was hopeful that there may be some other way.... Anyway, Option2 is definitely out. Like your mom, I approached the lender first, just a regular Citibank loan officer, but there was nothing he could do.
Regarding the school situation, we checked out the public school in our area and it's pretty bad. They also lost a few teachers due to cutbacks. Private is our only option now. It costs anywhere from $13k to $16k. Some schools do get away with $24k/yr for Kindergarten and there's even a waitlist. Example: Tuition and Financial Awards
Amazing huh?
Many thanks to those that replied.
@dad2jules: I checked with the resources, and my loan is not with Freddie/Fanny. :-(
@chet: Thanks for that idea. My FICO is about 820. It does sounds like it is really up to a senior level manager if he/she is willing to help out. However, I don't think speaking to a regular loan officer will yield any positive result even with a good FICO. So, how do I get in touch directly with a much senior loan manager who is empowered to make "out-of-the- norm" decisions? Do you know of any cases where this has worked out? Is there a thread on this forum of someone actually having some level of success? Thanks.
@aneftp: Thanks, but I had your 2 suggestions in my head before I posted. I was hopeful that there may be some other way.... Anyway, Option2 is definitely out. Like your mom, I approached the lender first, just a regular Citibank loan officer, but there was nothing he could do.
Regarding the school situation, we checked out the public school in our area and it's pretty bad. They also lost a few teachers due to cutbacks. Private is our only option now. It costs anywhere from $13k to $16k. Some schools do get away with $24k/yr for Kindergarten and there's even a waitlist. Example: Tuition and Financial Awards
Amazing huh?
A loan modification isn't an "out of the norm" idea. We just did one - out of a 10 / 1 arm into a 30 year fixed at a slightly lower rate. Simply called the 800 number on our statement and asked what the current rates were and the cost to modify. Cost us 3k (you can pay it or add it on to your mortgage) and was completed by signing on piece of paper. No appraisal / credit check...nothing. Easy peasy.
A loan modification isn't an "out of the norm" idea. We just did one - out of a 10 / 1 arm into a 30 year fixed at a slightly lower rate. Simply called the 800 number on our statement and asked what the current rates were and the cost to modify. Cost us 3k (you can pay it or add it on to your mortgage) and was completed by signing on piece of paper. No appraisal / credit check...nothing. Easy peasy.
Thanks for your reply Obrero.
If I may ask, what was your previous interest rate and what was the new rate that you "modified" into? And I assume the terms were the same as your previous, i.e no PMI etc, that sort of thing.
It was only about 0.25 less. Our rate will be higher than anything you can get because we have a super jumbo. Our terms stayed the same.
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