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Guest

Hi all,

Please look at my scenario and advise.

Here are my loan details. I have two loans
Loan 1: 5/1 ARM. $417,000. resets on 6/2012
Loan 2: HELOC. $85,000

I bought the house at: $558,000
Current value: $480,000

The lender has given me an offer to refinance and consolidate both loans. The loan would be for 95% of 480,000=$456,000. It would be a 30 yr fixed at 5%.

So my cash out of hand now would be $54,000. This is in addition to the cash I already put down when I bought the house.

Does it make sense to refinance? Any other options I should talk to my lender about? Any advice is appreciated.

Sean

elnoralittle · Posted: Mon Dec 15, 2008 6:55 pm Post subject:

If you love your home, I would do what it takes to keep it. I am not sure what the payment is on your first and second currently.
If your first and second are in affordable terms, and taking that money from your savings would deplete you, I would say stay at your current payment.

Some factors to consider are this:
How long are you planning to live in your current home
Is your neighborhood in severe decline
Could the value of your home decline even more
When the payment adjusts, what is the maximum percent it could adjust in the first year. This information will be on your note.

Once you put down the additional 54000, you basically lose part of that, only a portion of that will be recouped in value.

If you put 54000 down that would make your principal balance 448,000
I think that 8000 worth of closing costs on a refinance is very high.

While I think the 5% is a great rate, you might be able to do better than this offer when it comes to closing costs.

That is just my opinion.

you have a lot to consider. If you want one of us to review your good faith estimate, let us know.

bob1 · Posted: Mon Dec 15, 2008 9:09 pm Post subject: Make sense to refinance ?

Can you comfortably make the payments now ? Would the 54K break the bank for you ?

5% is a pretty darn good rate, it is the kind of rate I am offering to customers, so if it doesn't hurt to part with the 54,000, then it could make sense for you.

On the other hand, if that's all your savings, and you are able to make the payments, you might want to ride it out. You're not that far underwater, a little appreciation over the next 3-1/2 years could get you back to even or maybe even a little better.

My recommendation is to always protect the credit. Ask the lender to reduce the rate another 1/8th or more, and drop the closing costs. Is the lender the current lender or a new mortgage company ?

gmakerley · Posted: Tue Dec 16, 2008 9:31 am Post subject:

it appears the lender has taken steps to relieve itself of a potential loss, but at the same time made the deal reasonable for you to do the refinance.

i concur with the above commentaries - if it makes sense to you, it looks to me like a probable good move.

Guest

Thanks for all the replies. To answer your questions, yes the huge chunk would definitely deplete my savings. The lender is the current lender.

But I just checked zillow this morning and the value of the house seems to have dropped further. This means I will probably have to put more cash down which is definitely not possible. And it seems that mortgage rates are dropping as well. Considering this, I think I'll wait a bit.

Guest

Oh and I forgot to mention that I can still make the payments as my interest rate on the arm is 6%. So refinancing does not change my payments by that much.

Guest

Hey, the rates are quite low right now...So it's better to refinance now rather than waiting for a further drop in rate. You never know the rates may rise in the near future

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