Author Topic: Refi blues  (Read 7016 times)

stinkindog

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Refi blues
« on: April 19, 2013, 07:38:53 PM »
I have 47K left on my mortgage and no other unsecured debt.
I make 20k /net 15. I have been underemployed so I have only contributed to 401 for a year-am at max amt. Also have a Roth, savings, efund, and recently opened a sharebuilder acct. My budget allows me about $300 extra to pay on the principle each month. My rate is 8% which I know is high. I want to refi but believe I have some improvements to make to my older home-new windows and doors and more insulation before I try. I already have that money set aside and will be helping my brother with all of the work to keep costs low.
Do I refi now or do I make the improvements ? Do I pay down the principle in a chunk and rebuild the savings monthly? 
I am also revisiting the budget to see if I can throw more at the mortgage.
 
« Last Edit: April 20, 2013, 06:38:18 AM by stinkindog »

brewer12345

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Re: Refi blues
« Reply #1 on: April 19, 2013, 07:49:11 PM »
If you have enough equity to qualify, I would seriously consider refinancing the mortgage with a home equity loan at www.penfed.com.  They will do 15 years for 3.99% and eat the closing costs.

Another Reader

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Re: Refi blues
« Reply #2 on: April 19, 2013, 08:33:06 PM »
Lenders don't like to do loans under $100,000.  Talk to several local lenders and tell them what work needs to be done to the house.  They will tell you if they will do the loan and what the pricing (interest rate and fees) will be.  They may even be able to give you an idea of what the property is worth using a computer valuation model. 

The home equity loan Brewer12345 mentions is great if the value is at least $118,000, because the underlying mortgage will be counted as debt against the house.  It may also be difficult for you to qualify for that on your current income. 

It never hurts to ask.  Ask several lenders what they can offer, because lending guidelines do vary.  Cutting that interest rate in half will allow you to pay it off faster or leave you with more money to invest for the future. 

brewer12345

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Re: Refi blues
« Reply #3 on: April 19, 2013, 08:40:41 PM »
The home equity loan Brewer12345 mentions is great if the value is at least $118,000, because the underlying mortgage will be counted as debt against the house.  It may also be difficult for you to qualify for that on your current income. 


What?  I am suggesting refinancing the existing first into a first lien home equity loan for the existing balance of 47k.

Another Reader

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Re: Refi blues
« Reply #4 on: April 20, 2013, 07:25:34 AM »
I don't think the lender will refinance a first with a home equity loan.    My understanding is they will give you the loan if you qualify for the higher amount, and then you can pay off the first.  If someone has been able to do this by qualifying for the home equity loan only, I would like to know more about it.

brewer12345

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Re: Refi blues
« Reply #5 on: April 20, 2013, 09:34:29 AM »
I don't think the lender will refinance a first with a home equity loan.    My understanding is they will give you the loan if you qualify for the higher amount, and then you can pay off the first.  If someone has been able to do this by qualifying for the home equity loan only, I would like to know more about it.

Virtually every lender, including pen fed, is overjoyed to have a first lien position on a home equity loan.  Of course they will refinance a first mortgage with a home equity loan or even a HELOC.

TheDude

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Re: Refi blues
« Reply #6 on: April 20, 2013, 09:39:03 AM »
Yeah I think home equity would be the way to go. You may also be able to look into a  local bank or credit union.  If they keep it in house they might be willing to write one that small.

Another Reader

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Re: Refi blues
« Reply #7 on: April 20, 2013, 10:50:24 AM »
Things must have changed in the last few years.  I'm a little surprised.  Where does the requirement that the first be paid off appear?  Is it in the approval conditions?

Since this will apparently work, I would agree it's a good way to finance a small mortgage. 

Hmmmm....I wonder if I can refinance an investment property loan with a home equity loan or LOC and avoid the GSE financed property limits.....

brewer12345

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Re: Refi blues
« Reply #8 on: April 20, 2013, 11:06:50 AM »
Things must have changed in the last few years.  I'm a little surprised.  Where does the requirement that the first be paid off appear?  Is it in the approval conditions?


Usually the lender will lend up to XX% LTV (typically 80%).  If you have the income to carry a first and a second, they will lend up to 80% as a second and be willing to leave the first alone.  If you do not have the income or don't wan't to leave the first outstanding, they will pay off the first with the proceeds of the equity loan and give you cash for whatever additional amounts you wish to cash out (usually a bad idea, IMO).  For OP, I think a home equity loan for his small balance mortgage would be a good way to inexpensively finance.

Another Reader

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Re: Refi blues
« Reply #9 on: April 20, 2013, 11:28:03 AM »
I understand how seconds and HELOCS work for owner occupied properties.  If these loans are available for income properties and are not packaged and sold to a GSE investor, then the Fannie/Freddie rules about the number of financed properties should not apply.  I have an old high interest loan on one of my rentals that is not owned by Freddie or Fannie and therefore is not eligible for HARP.  I was considering paying it off with proceeds from the sale of another asset, but if I could refinance it with a home equity loan and use the proceeds from the sale elsewhere, I would probably do that.  Guess I need to make some phone calls on Monday....

brewer12345

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Re: Refi blues
« Reply #10 on: April 20, 2013, 12:34:13 PM »
I know these are portfolio loans for Pen Fed.  If you meet their requirements, you may be able to do a deal.  Other lenders may play ball with you too.

Another Reader

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Re: Refi blues
« Reply #11 on: April 20, 2013, 12:50:28 PM »
Come to think of it, IIRC MooreBonds refi'd a small balance mortgage on a PenFed Home Equity loan some time back.  However, I just checked their rates, and for non-owner occupied properties, the rate is 7.99 percent for up to 60 months.  Oh well....

Alex in Virginia

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Re: Refi blues
« Reply #12 on: April 21, 2013, 05:33:13 AM »
If you have enough equity to qualify, I would seriously consider refinancing the mortgage with a home equity loan at www.penfed.com.  They will do 15 years for 3.99% and eat the closing costs.

I'm ready to start an app with The Money Store.  NO closing costs except a $395 appraisal and a 3.75% interest rate. (I'll check penfed again, but my latest showed them wanting around $2000 in closing costs.)

Alex in Virginia

stinkindog

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Re: Refi blues
« Reply #13 on: April 21, 2013, 07:25:50 AM »
Thanks for the info. I think I will approach my current lender first and tell them of the improvements I am planning to make and go from there.  I will also check with the credit union for their rates and closing costs. Maybe I can work them against each other, but I really can't see them fighting over 47K.
« Last Edit: April 21, 2013, 07:32:39 AM by stinkindog »

Nords

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Re: Refi blues
« Reply #14 on: April 21, 2013, 10:38:08 AM »
My rate is 8% which I know is high. I want to refi but believe I have some improvements to make to my older home-new windows and doors and more insulation before I try. I already have that money set aside and will be helping my brother with all of the work to keep costs low.
Do I refi now or do I make the improvements ? Do I pay down the principle in a chunk and rebuild the savings monthly? 
You're going to save a certain amount of money in monthly payments if you refi the mortgage, and you're going to save a certain amount of money in monthly utility bills if you make the home improvements. 

Normally you'd go for the greatest savings payoff first.  But if you can get a zero-cost refi then you could do both the refi and the improvements simultaneously.

With a low HELOC rate you may want to consider building up your other investments first, but I understand if paying off the debt feels more important to you.

stinkindog

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Re: Refi blues
« Reply #15 on: April 27, 2013, 02:13:33 PM »
I spoke with the original lender and he suggested we do a modification down to 5.5%.  The house will not appraise at 62K-65K, which is what would be needed to do a refi. So I won't be spending $1600 in closing and appraisal costs and my rate and payment amount will be reduced. It isn't 3.9 % but I know the loan will not be sold and I can make larger principal payments. Any suggestions?

Another Reader

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Re: Refi blues
« Reply #16 on: April 27, 2013, 02:26:19 PM »
In your shoes I would try other lenders and look into the HELOC approach before I agreed to this.  A portfolio lender might be interested - did you ask your credit union if they hold small loans?

SunshineGirl

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Re: Refi blues
« Reply #17 on: April 28, 2013, 04:24:57 PM »
What are the terms of your current loan? How many years do you have left on it? What you were offered is better than nothing, but you might be able to find something better.

BTW, when you do your taxes, make sure you're getting the retirement savers credit, which is for lower-income workers who save money in retirement accounts. There is a program called VITA and there are preparers who will do your taxes for free and make sure you get all the credits to which you are entitled.

stinkindog

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Re: Refi blues
« Reply #18 on: April 28, 2013, 10:00:59 PM »
I am not sure I could get something better because of the appraisal requirements.  In the OP I said my rate was 8 but i forgot that we modified it in 09 and it was down to 6.5%. So he is offering a 1 point modification for free.
I have a little more than half left on a 30 yr fixed.