Should I refinance?

toriano_c · Joined: 09 Sep 2008 Posts: 1 1.38 Dollars($)

Long question but here goes...

I have a home with a value of about 235k - 240k. I paid 225k (portland, OR)
I currently owe approx. 205k.
I have a first mortgage of 5.75 (30 year fixed)
& a second mortgage which is, I think, 7.25 (30 year fixed)
Would I be able to get just one loan now, a first mortgage only? Would that bring my payment down?
Both my wife & I have credit scores in the 730's - 760's

adonis · Posted: Wed Sep 10, 2008 12:46 am Post subject:

Welcome Toriano_c,

This will depend more upon your home value, affordability, debt-to-income ratio. Your scores are good enough to help you qualify for mortgage at favorable rate of interest.

gmakerley · Posted: Wed Sep 10, 2008 7:00 am Post subject:

with the current rate you have at 5.75%, you're not likely to benefit from a refinance.

rates apparently dropped yesterday, but the average rate i just spied in the newspaper this morning was 5.8% or so...that's no better than what you've got on your first mortgage. not only that, but you'd pay a fair amount of closing costs, and i suspect that would negate the benefit you might derive from paying off the second mortgage and including that amount in the new first mortgage.

you'd truly have to do the math, as it were, to determine what benefit, if any, you'd receive.

Guest 0.10 Dollars($)

Thank you both for taking time out to answer. I appreciate your advice. gmakerley, I will take your advice and just hold off on the refi. I'll just have to concentrate on paying off my 2nd mortgage as fast as I can (i really hate paying interest).

Thanks again.

vegas_storms · Joined: 12 Sep 2008 Posts: 50 1.24 Dollars($)

Hi toriano_c ,
Both the above answers are good, but one would also need to know the amount of the second mortgage loan versus the amount on the first to make an accurate decision as to whether refinancing makes sense.

I would assume that you have a fairly small second like the gentlemen above did, but you never know. It is possible for someone who owes 205K to have a 80K first and a 125K second, under this scenario it would make financial sense to refinance.

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

You could combine the first and second into one loan but then you would have PMI since the loan would be over 80% of the appraised value. So it doesn't make sense to refinance as of now. However, if rates drop a bit more you may want to revisit this option since you may be able to buy out PMI with a slighly higher rate. For example, a 30 year fixed rate at 95% LTV would be 6.125 with no PMI. Now if rates go down buy another .25% then your looking at 5.875 and that could make sense.

Rates that you see quoted will always include PMI to be added if applicable and you would most likely want to buy out the PMI which would add about 1/2% to the current interest rate. Hope this info allows you to watch the market to determine if and when it makes sense to refinance.

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