Mortgage is WAY under water, how can I refinance?
by Mortgage Rates on Friday, October 15th, 2010 | 4 Comments
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The average mortgage rate for 30 year fixed is 4.63% as of today.
(that’s on the low side).
Make sure this loan you are getting is a FIXED loan – not an option, interest only, ARM, 5/1 or 5/5, and don’t pay points.
Consider anything besides a 30 year fixed without any pre-payment penalties a scam.
Talk to your lender to re-fi. All they can say is no.
Be a bit careful with that 4.37% quote – make sure they are not taking you for a ride.
Check all the closing costs carefully – they could be making the $ from them.
If it is not a scam loan ask them to lock in that rate.
You don’t want to go through all the work then get a new rate the day before you settle your new loan.
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I don’t see how you could lower your payment by $275 if you are going to roll in closing costs on the refi. Many people here say that you should lower your rate by 2% before you jump to refi.
You don’t say what the 2nd loan is for but I am guessing you have done a cash-out for some remodeling. If so, then the ‘drive-by’ appraisal didn’t do you any favors. Keep in mind that a real estate appraisal will usually reflect a higher value than a county appraisal district appraisal. Did you find at least 3 comparables in your area and compare them to your appraisal? That’s the only way to get a true picture of the value of your home.
The 2nd loan won’t prevent you from doing a refi, but I don’t see how you can reduce the debt that way and you will just be adding closing costs and not lowering the interest enough to save $275 per month.
What about your payout penalty? Have you calculated that into the equation? With the new mortgage rules in Canada you can only refinance up to 90% loan to value. If you want to move your first mortgage and leave the second in place you will have to make sure that the second mortgage holder will allow you to do that, as it wouldn’t be in their best interest if the property is under water. I can’t see them allowing that and once you remove the first lender on Title the second lender gets first dibs.
Assuming that your property can be appraised around $320,000, the best fixed rate for a 5 year term is 3.99% and you can choose whatever amortization you want. You would be better of going variable if you are looking at cash flow as the current variable is at 1.9%.
if you are more than 5% underwater, you have no chance of being able to refi –
and you pretty much need 20% equity AFTER the refi anymore to get any bank interested
and I don’t think you would be allowed to refi your 1st MTG at all with a 2nd already on the house
you are not going to be approved for any more home related debt at all for many,many years
you basically have no options right now – check back in about 10 yrs when you might be at even
I’m hoping to reach that point in 6-7 yrs