Should I refinance?

travisjobrien · Joined: 30 Dec 2007 Posts: 1 1.44 Dollars($)

1st mortgage = 359650 @ 6.25% 5 year interest only (ending 05/2010)

2nd mortgage = 88778.52 @ 9.625% 5 year interest only (05/2010)

No mortgage insurance
Plan on being in home 5-10 years

Is it better to combine both and refinance, refinance separately or do nothing?

ckalvesmaki · Posted: Sun Dec 30, 2007 8:11 pm Post subject:

Combining the 2 mortgages would put you over the fannie conforming loan limit.......so while the rate on the second isn't stellar.....you can get a fixed rate for about the same rate you have currently on the first......What is the house worth?

helping_user

Welcome Travis.

You have perhaps given here the entire loan amounts in each case. But what are the loan balances, because when you refinance, you may probably go for the entire balance for a combined loan amount.

Cedric, you've spoken of the conforming loan limit, that's right but say if the entire loan balance doesn't exceed the limit, then I think there's no problem with a combined refinance loan. Any thoughts?

ckalvesmaki · Posted: Tue Jan 01, 2008 7:36 am Post subject:

The conforming loan limit is 417k.....

1st mortgage = 359650 @ 6.25% 5 year interest only (ending 05/2010)

2nd mortgage = 88778.52 @ 9.625% 5 year interest only (05/2010)

Grand total of 448k......The loan balances are in the OP's post........So a 417k first and the balance on a second is probably the best way to go depending on what the value comes in at.......

jbarto65 · Joined: 04 Nov 2007 Posts: 626 -0.11 Dollars($)

I think it is always good to have one loan over two if at all possible, can you find someone to refinance this amount of money.

0.10 Dollars($)

This smells a little like a yank but it's hard to tell. In May 2005 a 6.25% rate for a 5/1 would have been relegated to only the worst of the FICO challenged. Going rate was in low 5s for jumbos and if I recall correctly, conforming was trading in their usual position relative to jumbos. Fannie "window" net yield was 5.658% in 5/2005. Always a big pickup on MBS versus window pricing and those were the good olds days when borrowers received a substantial rate reduction for bearing the increased risk. Alas, not so today.

Assuming the figures you gave are in fact accurate, needed parameters for any "crystal ball" advice guess are : estimated closing costs, index (LIBOR is in a poor position right now) and margin (typical range is 2.25 to 2.75% for average FICOs), initial and subsequent rate increase caps, and your degree of monthly payment sensitivity.

With just the data provided and a 3 to 7-year home retention projection, my inclination is that you should consider leaving the first alone and whack away at the 2nd with additional principal payments – 9.625% is a bummer assuming average FICOs. There's just too little information given to offer more than an "inclination".

helping_user · Posted: Tue Jan 01, 2008 11:51 pm Post subject: RE: combined loan

yes Jbarto, it's good to go with one loan instead of two when a person has other financial liabilities. But in this situation, the combined loan won't work if the OP's total balance is higher than 417K and here it is so. A second loan is a bit of risk but in this case it may be worth going for it.

Thanks.

livinginnky · Posted: Wed Jan 02, 2008 1:43 pm Post subject:

What is the home's current value?

What are your credit scores?

How long have you had the loans?

What are the payments?

Much more information is needed before any good advice can be given.

If you have 20% or more in equity you shouldn't have to pay mortgage insurance on 1 loan. That could possibly save you over paying the higher 2nd's rate. Just depends on the total scenario. Including tax implications.

Please answer the questions above and add anything additional you know about the situation.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.03 Dollars($)

What is the home value? This is an important factor

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