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We purchase a townhouse for $500,000 interest only. We have a ARM that will adjust in Feb 2010 for the first 350,000 and a 150,000 HELOC that is prime -.05. The value of the house has dropped to around $450,000. With this drop in value, is there any way that we can refinance to lock in a lower fixed rate?

greg1 · Posted: Tue Jan 29, 2008 12:01 pm Post subject:

Based on the estimate of your homes value it would be a struggle. I suggest, if you have not already, speaking to a home appraiser regarding your properties value.

I would also need to know the interest rate on your first mortgage to tell you if you may be able to get a lower fixed rate.

There may be an option to make this work with the existing estimated value you give but it would take some help from your second mortgage holder. They would have to agree to release a portion of their balance on the lien so you may refinance.

Although there may still be some 100-125% loans floating around out in the market somewhere it is highly unlikely you will find one at a lower fixed rate.

Guest

Thank you for your answer. The ARM is at 5.375.

greg1 · Posted: Tue Jan 29, 2008 1:44 pm Post subject:

I would say it appears to be in your best interest to wait. Try your best to pay down your mortgages so you can be below the value of your home. FHA may become an option for you depending on what county and state you are in. They allow you to do 95% Cash Out refinancing at or around that type of fixed rate. I say Cash Out because your HELOC will likely be considered cash out unless you obtained it to buy your home and you have taken no new draws from it since then.

michelle · Posted: Tue Jan 29, 2008 3:10 pm Post subject:

I have to agree with Greg. I think it would be best for your to wait until you have paid your balances down some.

The interest rate you currently have is quite good and you still have several years before any adjustment takes place.

ckalvesmaki · Posted: Wed Jan 30, 2008 7:36 am Post subject:

There are lenders who will ignore the CLTV......becuase it will be over 100%.......FHA and a few portfolio lenders.....so the answer is yes you can refi your first into a fixed rate. The second lien holder must be willing to subordinate.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

Hi Iooo,

I would also suggest waiting until the housing market turns around. There just are not reasonable options when you owe more than the value of the home.

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