Author Topic: Refinance to pay off debt and lower PMI  (Read 2286 times)

d3minimis

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Refinance to pay off debt and lower PMI
« on: December 22, 2014, 10:02:03 AM »
Hey all,

Currently paying $1,300/month for P&I, insurance, tax and $160/month PMI. Original mortgage was 160k, currently 143k; been paying for a little over 2 years. I'm starting the process of refinancing over 30 years at about the same rate (3.875 -> 4.00%) which will cost around $1,300 in closing costs (excluding prefunding escrow).

The new monthly payment will be ~$1,100/month, due primarily to lower PMI (will be $25/month) and lower balance over 30 year term. The primary reason for doing this is to free up the $200/month to pay towards the remnants of student loan and car debt (~$5k) and then towards savings.

Any thoughts on my plan/logic?

juuustin

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Re: Refinance to pay off debt and lower PMI
« Reply #1 on: December 22, 2014, 10:50:08 AM »
I just completed a re-fi for similar reasons.  Took a slightly higher interest rate to completely eliminate FHA MIP (similar to PMI).  Total payment including P&I, insurance, tax, and MIP is going from $2,034 to $1,814.  No closing costs.  Seemed like a no-brainer.

d3minimis

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Re: Refinance to pay off debt and lower PMI
« Reply #2 on: January 07, 2015, 10:40:45 AM »
Update:

Our appraisal came in 10k lower than I think is the fair market value. I contested it by sending them a list of reasons why I think it's not accurate and they support their original proposal. Below are the reasons I listed.

"My main concerns are:
   - the appraisal uses an arbitrary 12 month window for comp sales
       - there were two comps within the past two years with an identical floor plan and more similar finishes that were sold at $175k and $168k.
           * address 1 - 9/30/13 @ $176k
           * address 2 - 6/5/12 @ $168k (this did not have an updated kitchen or wood flooring in the home - See walkthrough video here: video removed)
   - the appraisal provides no adjustment for comps for new windows, updated kitchens, or wood flooring. Based on research through Zillow, Youtube, and Realtor.com, most of the comps have only carpet and laminate and I think it's fair to say that    wood floors and updated kitchens demand a higher price from the market than houses without.
   - there is no adjustment for lot size even though our lot is significantly larger than most other comps"

It's really frustrating. Fortunately, the deal can still go through we just have to bring 1,600 to closing while we were expecting to only bring 800ish. We will still save ~2,700 over the next 3 years (the period in which we were locked in to pay PMI for, regardless of hitting 80% LTV), but  will just increase our period to recoup costs.

Has this happened to anyone else?

d3minimis

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Re: Refinance to pay off debt and lower PMI
« Reply #3 on: January 07, 2015, 11:04:29 AM »
Here is the appraiser's response:

"First, borrower suggested that two sales could have been used as comparable sales. These sales closed in September, 2013 and June, 2012 respectively, which makes them 15 and 30 months old. Borrower states that the 12 month window for comparable sales is arbitrary. However, the date of sale is an important factor in the selection of comparable sales. In fact, most lenders prefer to have comparable sales that have closed within the last six months, and twelve months is the maximum limit. This is due to the fact that market conditions do change and market conditions are an important factor in property valuation. Lenders demand that estimated market values are supported by current sale data. For these reasons, sales that are over 12 months old have not and cannot be included in the analysis for this property. Again, this is a lender mandated rule and not an appraiser decision.

Second, the borrower states that no adjustment has been made to the comps for new windows, updated kitchens, or wood flooring. However, all of these factors are taken into account when determine the quality and condition ratings. We do not break out and make adjustments for individual items. All items are taken into consideration and an overall quality and an overall condition rating are established. For example, the subject has updated kitchen, new flooring, new windows, one renovated bathroom, and roof is 7 years old. It is given a C3 condition rating. This is considered a rating of "good" or "updated." The MLS listing for  indicates that the interior this home is basically 2 years old and includes new flooring, new appliances, new carpet, new furnace, new roof, new cabinets, new hardware, new ceiling fans, new base molding, new paint, new concrete drive, etc. This home does not have exactly the same updates or same materials as the subject, but is rated as equivalent to
the subject in overall quality and condition. The MLS listing for states that this home has an updated kitchen with granite countertops, new laminate flooring, new carpeting, new roof, new windows, new furnace, new central air, etc. This sale was also given an equivalent condition rating. In summary, we do not make adjustments based on specific features, but rather on the entire package.

Third, borrower states that no adjustments have been made for site size. The subject property backs up to a ravine and while the overall size is bigger, it does not have more usable land. The ravine does create a nice view, but is not a larger usable yard. Therefore, it is not considered value superior to some of the smaller sites. No site adjustments were deemed necessary and none have been made."

Summary: "We consider 2 year old carpet and hardwood floors throughout the house to be equivalent in value."

d3minimis

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Re: Refinance to pay off debt and lower PMI
« Reply #4 on: January 07, 2015, 11:06:09 AM »
This is infuriating. If there is no distinction in the quality of the updates, then why make them if the appraisal doesn't reflect it?