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Hi there forum members--

I was hoping someone can help me determine if it's worthwhile to refinance right now. Here're some pieces of information:

I have a 5-1 ARM (will reset in 2013) at 5.001% and a HELOC of $50K (0 balance). Both are with the same lender. The loan amount on my condo is $210K, and a current appraisal would probably be between $270K-$300K.

I wanted to lock-in a 30-year fixed rate (with the same lender) and keep the HELOC open. The problem is that they will need to conduct another appraisal in the refi process, and, depending on the result, I might lose my HELOC due to insufficient L-to-V ratio.

I was hoping to keep that HELOC open in case of a really rainy day.

Is it worth considering the refi right now?

Help!

t

raymond · Posted: Sun Nov 15, 2009 8:13 am Post subject:

If it were me, I'd refinance if I could get 5% at 30 years, because I think interest rates are artifically low right now. It'd be nice to have the HELOC, but not necessary. The experts say your goal should be to set aside a cash reserve for a really rainy day, then start growing your long term savings after that.

eric1 · Posted: Mon Nov 16, 2009 6:29 am Post subject:

I think you could probably get even less than 5% right now. Either way, it will all depend upon how long you plan to be in your home.

Guest

With a conforming conventional agency loan, if your first mortgage is at 80% LTV or lower, the HELOC limit can be up to 95% Total-Loan-to-Value ("TLTV," the sum of first mortgage amount plus the HELOC credit limit), assuming at least a 660 middle credit score. So, if your appraisal came in at $270,000, the TLTV maximum would be $256,500. With the HELOC limit at $50,000, you could do a $206,500 first mortgage refinance and put the balance of $3,500 plus closing costs onto the HELOC, assuming the lender is willing to subordinate. Since you now have both loans with one lender, and you own a condo (a four letter word in mortgage land), your current lender may not be eager to subordinate the entire HELOC limit, and may counter with a reduced limit. That probably depends on how the HELOC was originally underwritten (i.e. 80%, 85%, 90% or 95% TLTV). They may want to reduce the limit to match the original TLTV category. If you get a loan from another lender, the HELOC lender might be less concerned since their exposure to your property is reduced a little. Of course, if your appraisal comes in higher than $270,000 the HELOC lender will look at things in a different light, and you might be able to refinance the entire first mortgage with closing costs rolled in rather than being paid by the HELOC.

Condo's don't get as good a rate as a detached single family home, however at the close today a loan of $200,000 or more at 80% LTV, with 90% TLTV with a 740 credit score would get a 30-yr fixed rate of about 4.875% with low closing costs. Higher rates or fees for lower credit scores. Whether you should do a refi depends a lot on how long you think you will own the property, and how worried you are about future interest rates. Of course, since you're at 5.00% now, and for 3-4 more years, you're risking nothing but closing costs to refi. The approximate rate for a 5/1 ARM 4.125%, 7/1 ARM 4.50%, 10/1 ARM 4.75%.

riseabove · Joined: 09 Nov 2009 Posts: 277 11.01 Dollars($)

I'd say it's worth a refinance.

even if you can't keep the HELOC at it's present rate, you may be able to get a smaller one.

If all you're looking at is protection for a rainy day, that should eb fine.

Don't forget that once the market upturns and your equity increases you can re-evaluate the HELOC situation

gmakerley · Posted: Mon Nov 16, 2009 9:23 pm Post subject:

how do you get 5.001% - where did that thousandth come from?

oh well...if your main concern is keeping the heloc open, then you'll not want to refinance. if that's not as important as paying the lowest rate possible, then go ahead and refinance and, as eric noted, you'll quite likely get a better rate than 5%. it's really all up to you. helocs will still be available down the road.

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