When to refinance?

duduong · Joined: 20 Dec 2008 Posts: 2 1.64 Dollars($)

I have 190k at 5.75% 30 yr fixed on my first mortgage and 42k on my second HELOC. I've already made monthly payments on these loans for 5 years. My house is worth about 250k now. I'd like to refinance, but don't know when is good time to do it and what kind, rate should I get. Thanks in advance.

smithsussane · Posted: Sun Dec 21, 2008 9:34 pm Post subject:

Hi duduong!

Welcome to forums!

Before deciding to refinance the mortgage, I would suggest you to do some mortgage shopping. This will help you to know the rates prevailing in the mortgage market. You can also check out the mortgage rates in the given link:
http://www.mortgagefit.com/rates/

You can refinance with your current lender but if you do not find the rates and terms affordable, you can also contact other lenders as well. But before refinancing the loan, you should also remember that you will have to pay the closing costs.

You can also speak to the lenders of this community and seek a no obligation free mortgage consultation from them. This will help you in comparing the market rates. Then you can decide what type of mortgage will be affordable for you.

Feel free to ask if you have further queries.

Sussane

banker0679 · Posted: Wed Dec 24, 2008 8:44 am Post subject:

Good Morning Duduong and Welcome to Mortgagefit!

You may need to do a refinance with an FHA loan. Conventional loans only go up to 90%, and FHA allows up to 95%. Your current LTV would be around 93%. FHA has really good rates, and low PMI payments. PMI would be another thing that you may need to take in consideration since you're getting out of the 80/20 option into 1 loan.

Please let us know how things turn out!
Thank you
Robert

gmakerley · Posted: Wed Dec 24, 2008 8:50 am Post subject:

from reading your post, duduong, i would think it's not necessarily in your favor to refinance. your loan to value ratio is high (93%) now, and unless you pay your closing costs out of pocket, it will become higher - thereby making fha pretty much your only option. those rates are in the same vicinity as your current rate, so the refinancing wouldn't necessarily make much difference.

i would think you're probably not being hurt with the equity line, either; as rates on those have dropped and may very well be dropping again quite soon.

what you'll need to do is discuss this with a lender you can truly have trust in, to see if it would truly benefit you to refinance.

jveenstra · Posted: Fri Dec 26, 2008 9:10 am Post subject: Refinance

If you refinance, the rate you should refinance should be at 5.000% or lower and you should keep and subordinate the existing HELOIC.
If your rate now is 5.75% and the balance is $190,000 and you have been paying for 5 years, that means your mortgage started at $205,000 and your present principal and interest is about $1,196 monthly.
I do not know what state you are in and I do not know your typical taxes and closing costs.
A good guide for refinancing is if you can lower payment enoygh so you break even on the costs in about 2 years (24 months). To me that means your new principal and ineterst payment should be about $1,196 monthly principal and interest. If you raise mortgage to cover prepaids and closing costs. a new mortgage of $197,000 with a monthly payment of $1,058 would requite an interest rate of 5.00%. Lower, of course, is better.
If you have 300 payments left at $1,196 you will pay $358,800.
If you have a new mortgage at $1,058 for 360 months you will pay $380,880 which is $22,080 more. But, if you save the difference between your current payment and the new lower payment for 300 months at $138 a month you save $41,400 and that is if you save at no interest at all.
So, you save more than you pay over the long haul.
If, instead of saving monthly, you continue to pay on the new mortgage what you now pay on the present mortgage, $1,196, in other words, voluntarily pay $1,196 when you are only required to pay $1,058, you will pay off the new $197,.000 mortgage in 279 months which is 21 months less than the payments you have left now and you save $25,116.
Most people do not save monthly and most do not pay extra, however, the average life of a 30 year loan is 7 years or less and the average time anyone lives in the same house is 14 years so you save montjhly with lower payments and never pay for 30 years on the same mortgage anyone.
Right now a 15 day lock is better than 30 day lock and your mortgage lender needs time to subordinate.
My suggestion: Pay for an apprasial now, get tyhe subordination and the processing all done and ready to close, and, based on what the fed says they will do, lock for 15 days and close below 5.00%.
At risk is the appraisal. If you pay for an appraisal and rates go up you lose. No guarantee, but, right now it is a good bet to pay for the appraisal.
You DO NOT want to refinance and pay off the HELOC because that looks like it puts you over 80% of value and you do not want to do that. You would need Private Mortgage Insurance and that monthly payment would eat up your basic savings monthly.

All times are GMT - 7 Hours

Page 1 of 1