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Who is refinancing their mortgage?

Vincerama2

Vincerama2

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My wife's condo's mortage is a 5/1 ARM and it's resetting in June, so we decide to refi to a 30 year mortgage. What luck, rates are pretty low! Anyone doing a refi? What rates are you getting?

Oh and get this...so we were afraid of a jump in rates for her 5/1 arm it "jumped" from 4.75 to ... 3.50%!!! (We're still gonna refi to a 30 year though, even though it's a higher interest rate just to lock in some certainty).

With points paid, we can get her mortgage to 5% (which is obviously higher than 3.5%, but again it won't jump next year, then the year after that, etc like an ARM would). It's a bit of a bummer that when she bought the condo we were single and so it was her "Primary Residence" for tax and loan purposes .. now it's an "investment property" and carries different write off and gets much higher mortgage re-fi rates. Bah. (It's too close to our house to consider a second vacation home, but since it's rented out, we can claim losees because the rent doesn't cover the whole mortgage payment+HOA... dang I hate HOA...)

V
 
Erin, you should ask to make sure that is the case, don't let an opportunity to drop your interest rate by a percent and a half!

V
 
Mike, a point is a percentage point. 1 point means you pay the lender 1 percent of the loan amount. In exchange, they reduce the interest rate (typically by 1/8 percent).
 
Vincerama2 said:
Erin, you should ask to make sure that is the case, don't let an opportunity to drop your interest rate by a percent and a half!

V
Click to expand...

I asked my mortgage broker and she said I needed to. I wonder if all brokers/lenders require that, though.

Has anyone here refinanced without getting an appraisal?
 
I would do it but my issue is with the drop in the values since I bought my house I would have to pay pmi in order to refi . The rate savings wouldn't be worth it.
 
I'm in the same boat, we refied last year this time to do the remodel and our rate was 5.25 which was good at the time. Now that rates are rock bottom I can't re-re-fi again because the house is still under construction (93% complete), A bank would not touch a house under construction.
 
The key to a good re-fi is LTV . Loan To Value . I would love to re-fi , but I wont be ready for another six months . I'm at 6.75 on a FHA loan right now . The amazing thing is that they gave me a loan in the first place . I am self employed so most banks wont count my income since I don't technically have a job . It took a stack of paperwork about 4"-5" tall to make it happen . I only bought in Oct. so ill be patient .
 
Mike, a "Mortgage" is when you have to "Pay" for your house... :p

(I'm just jealous, and making a lot of assumptions!)

You can pay down a "point" (percentage) to get a slight rate reduction. For instance, say you need a mortgage of 100,000 and the rate is 5.25% you can pay half a point ($500) to drop the rate to $5.125%, or a full point ($1000) to drop it further, like 4.85. No, it's not linear you don't get half the rate drop of a full point if you pay half a point. The idea is that you are giving the bank a percent up front, even though they don't drop your rate by a percent (obviously, otherwise people would just pay all the interest up front!)

There are lots of things to weight when you do this (and keep in mind that the money you pay for points is tax deductible, so it might be a good deal!)

Start with a mortgage calculator that displays an amortization table.
- Enter in your loan without points at the no-points interest rate, note the montly payment
- Enter in your loan with the one point interest rate, note the monthly payment
- Note the difference in montly payment (it's usually not as big a savings as you think)
- using the difference in montly payment, figure out how long it takes to recover the money you spent on the point...that is your break even point, after that payment, the point was worth paying. Was it 3 years? 5 years? 10 years?
- Figure how long you are going to be paying that mortgage (ie; how long are you going to live there?!)

What complicates the matter is this...what if you took the points money and used it to reduce the oringal loan amount? So if instead of taking a $100,000 loan and paying 1 point, what if I took out a 99,000 loan with no points? So you have to factor that in as well. Also, as mentioned, the point is tax deductible, so say that you get 20% of the point paid back in tax savings. Here the $1000 that you paid as a point actually only cost your $800. Then what if you took the $200 and put it against the principle?

I think I will likely pay a point for a lower interest rate, I can see staying in my house for at least 5 years ... mostly because I don't want to sell my house before the market recovers, so selling it sooner than 5 years might result in a greater loss.

Conforming loans get a much better rate too, so any mortgage over $417k is non-conforming. Some people throw craploads of money to cut their mortgage down to be a conforming loan. Some people re-fi once their principle drops to that level.

For me, I could actually drop to 417 but I'd be exhausted of savings which is not a good idea at this point in time I think. You need a cushion during this recession (yes, yes, I know...saving money is what's keeping us in the recession. I'm selfish, let someone else spend us out of recession)


Whew, that's a mouthful!

V
 
I'm preparing on jumping on the refi wagon, but my equity has come down a lot. So, I'm reluctant to pay $300 for an assessment if I'm going to pay a higher interest than 5% or even be denied. If zillow's "Zestimate" is correct, I'm not refinancing.

Vince, a little OT but re your first post, aren't the deductions for the rental limited by the income? In other words, the losses do not lower the adjusted gross income. Bah - I don't really know what I'm asking. I've re-written this paragraph too many times. Answer if you can LOL.
 
Oh so paying "points" is simply giving the bank money without it actually affecting your principle that you owe? So you pay off 1 point on a $100000 loan, you still owe $100,000, you simply have a reduced percentage rate? Almost like bribing the bank? :D

And Vince, I understand what mortgage and pay is... I'm looking into potentially buying a home (or more importantly the land) elsewhere in the not too long (but not too short) future.
 
Erin, the key to the loan is the value of the appraisal, not whether you have work in progress or not. Depending upon your particular situation and property, some lenders will do only a drive by external appraisal, while others will need to see the interior to do a full appraisal. If your current LTV is good and you're not getting up into the higher ranges, you may need to do just an external appraisal (although this varies from lender to lender).

I'd also suggest to check out some of the local Credit Unions as I've seen some really good rates there (definitely beat the banks and S&Ls).
 
sfsuphysics said:
Oh so paying "points" is simply giving the bank money without it actually affecting your principle that you owe? So you pay off 1 point on a $100000 loan, you still owe $100,000, you simply have a reduced percentage rate? Almost like bribing the bank? :D

And Vince, I understand what mortgage and pay is... I'm looking into potentially buying a home (or more importantly the land) elsewhere in the not too long (but not too short) future.
Click to expand...
Paying point is like paying interest upfront. It's better if you are planning to stay in the house for at least several years. If you are planning to sell the house in a year or two, you lose money.
 
In this market if you are buying a house with the intent of selling in a year or two losing money on prepaid interest is the least of your concerns.
 
I locked in on a conforming loan at 4.5% and am going to pay a point.
My Loan is currently a variable at 3.75% but as we all know that will change.
 
I would love to refi, but I'm in the same boat as Bryan and others. My house value dropped lower than my loan amount. I dont think i'll be refinancing my place anytime soon. I just have to keep buying them Lotto tickets :D
 
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