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Back to refi headaches

January 17th, 2017 at 07:01 pm

So the place across the street sold at $499K. That's good news because our place is comparable (slightly less updated but more square footage) and we owe $399K, which would give us 80% LTV.

Bad news because a refi is now back on the table, only with considerably less attractive rates. We're currently at 3.5% fixed. The best 30-year rate AimLoan is showing is us 3.75%, and that's with (at least) $9K in closing costs that we'd supposedly have to foot the bill for.

Back in August we could've gotten the same deal for 3.25% interest rate.

The ones we wouldn't have to fork over as much money for would be 4.0% to 4.25%. So we'd actually be going up quite a big from our current rate. That would only save us $154 per month over what we're paying now with mortgage interest. I guess it would pay for itself fairly quickly if it were a nearly free refi. I'm checking again with the AIM guy because I seem to remember when he got me a more "actual" quote, there were no options with zero points and zero closing costs, which the link he sent is currently sending me.

Assuming we could scrape up funding for that (we don't have a ton of cash on hand now that we've committed to the bathroom reno), that would save us about $250 per month. So I guess it would pay for itself in 3 years.

It's just that much more painful because we'd probably have to take out an unsecured loan of some sort to finance the refi. Which would mean it would take more than 3 years to really pay for itself.

I don't know. Interest rates are probably going to keep going up. If we wait longer, it might actually end up being beneficial to hang onto our current mortgage, $260 mortgage interest premium and all, vs. taking a higher interest rate.

I just don't know if it's worth it. I'm so bad at figuring these things out!

14 Responses to “Back to refi headaches”

  1. Hurston Says:

    In case you haven't already explored this option, you may be able to get your current mortgage lender to remove the PMI on your home loan by providing them with an updated appraisal that shows that you have 80% equity based on the current value of your home. It would be worth checking with your lender.

  2. Carol Says:

    Thurston has a good idea. I don't understand why you would want a higher rate. Nor do you want to reset to thirty years, I don't think.

  3. ceejay74 Says:

    Unfortunately it's an FHA loan. The mortgage insurance stays for the life of the loan. So it's either refi or live with it.

  4. Carol Says:

    Ahh, thanks for explaining.

  5. AnotherReader Says:

    You really do not have a 3.5 percent mortgage. Add the mortgage insurance payment to your principal and interest payment and work backwards to get your real interest rate. It is probably at least 3.65 percent or possibly as high as 3.75 percent.

    For example. If you borrow $400,000 at 3.5 percent, your P&I payment is $1,796.18. If you pay $150 a month in MI, your real payment is $1,946.18. That is the same as an interest rate of just under 4.2 percent.

    If you post your P&I payment and your MI payment, I can do the calculation or you can play with a mortgage calculator using your original principal and the total of the two payments to get a close estimate.

  6. ceejay74 Says:

    Thanks I appreciate any help I can get. My P&I is $1,854 and my MI is $263 per month.

  7. AnotherReader Says:

    Forgot I need the original principal.

    Two other thoughts. First, one comparable sale does not make an appraisal. The appraiser will need three. If the other two sales do not support the third sale, the value may come in low. Second, read your mortgage documents carefully. In theory, if you deed an interest in the property to your tenants, the lender can invalidate the mortgage, declare you in default, and demand immediate repayment. This rarely happens, but there is some risk that this could happen.

  8. ceejay74 Says:

    Original loan amount was 412,898, current balance is $399,535.

    That's a good point about comparable sales. This is the first one that's been at the value we need. Of course our place is bigger than all the closest comparables but I'm not sure how much SF would really impact it.

    The document I'm considering with my neighbors would not give them an interest in the property until they'd paid their full share. At that point we would draw up a new deed with them as equal owners. Wouldn't happen until the mortgage was paid off. Of course I need to check with a lawyer (besides my neighbor who's a real estate lawyer) to make sure that couldn't be used as proof that there was actual ownership before that.

  9. AnotherReader Says:

    Worked backwards. Looks like you borrowed $413,000. If that's correct, your interest rate is equivalent to 4.6 percent. The sum of the payments is $2,117, which is what the P&I on $413,000 would be at 4.6 percent. If you can get a 3.75 percent loan on $399,000, your P&I payment will be around $1,848. $2117-$1848 = $269. In your shoes, once I was sure the property would appraise, I would do this loan.

  10. My English Castle Says:

    Fabulous calculations, another reader. Helpful for all of us. Thanks.

  11. AnotherReader Says:

    For people considering FHA loans today - don't do it. The fees and MI payments are outrageous. Instead, look for conventional financing with 5 percent down or a piggyback 80/15/5 loan, with the 15 percent second loan at a somewhat higher rate. Spend the first few years paying off that second or if the value increases and interest rates are stable, refinance when you have enough equity. If you can lock the first mortgage in at less than 4 percent, you will likely be in good shape in 5 years.

  12. ceejay74 Says:

    I don't know if you can answer this, AnotherReader, but how much does price per square foot impact assessors' decision-making? Back when we bought for $464,500, in 2014, our price per square foot was $115. Of the last 10 multifamily homes sold in my ZIP code, only one had a price per square foot that low. The rest of them ranged from $132-$221 per square foot. (This is according to Zillow results.)

  13. AnotherReader Says:

    The appraiser will adjust for that. Also, the number of bedrooms and baths in each unit are considered. If you have it, dig out the appraisal from your purchase. See how the adjustments were made there.

  14. livingalmostlarge Says:

    Also price per sq foot is usually higher on smaller units. They get a higher value than bigger homes. So what do you think your price per sq foot would be? If it's the only comp it'd be risky in case the appraiser puts it lower and you don't end up with 80% LTV. Although how much would you be out going with this refi? Just the appraisal cost? It might be worth paying for an appraisal say $500 to see if you'd get your 80% LTV.

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