Should I Refinance My Home

Bills.com Team
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Highlights


  • Examine your costs, as well as your savings, before deciding to refinance.
  • Define your goals, to make sure that refinancing will meet them.
  • Research rates and compare banks and lenders, if you want to get a refinance mortgage loan.
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Does refinancing my home make sense? Get the answers to "Should I refinance my mortgage"?

Refinancing your home can be a great way to save money or to improve your financial situation. However, before you refinance, you need to determine if you are refinancing for the right reasons and if the market conditions are right for refinancing. To have a successful refinance, it is also important to who will work as your partner when you ask yourself, “Is it the right time to refinance my home?”

Your home is most likely your biggest investment. So, a decision to refinance your home is not to be taken lightly. To help you decide whether refinancing makes sense, start by reviewing the basic reasons to refinance. Learn why other people refinance their homes, when refinancing may not be the best decision, so you can determine if refinancing is right for you. Before you decide to refinance, define your goals.

Four Reasons to Refinance Your Home

1. Lower Your Monthly Payment

Refinancing can be an effective way to save money on your monthly mortgage payment. Refinancing can save you money, each month, by lowering your interest rate and the size of your monthly payment. Even homeowners who owe more on their home than it is worth are finding refinance programs to help them, such as and FHA Streamline or VA Streamline Refinance loans.

2. Lower Your Total Costs

Refinancing can help you pay off your loan faster and greatly reduce the total amount of interest you pay. Many people are refinancing to shorter-term loans, such as a 15-year loan, to save money over the long term. Refinancing to a shorter-term could increase your payment, so be careful about taking on a payment that could be difficult to afford. It may make sense to refinance at a slightly higher interest rate for a longer term and then to accelerate your payments to pay off the loan faster.

Quick tip #1

  Contact one of Bills.com’s pre-screened refinance partners for a .

3. Reduce Your Risk: Change an ARM to a Fixed-Rate Mortgage

A good reason to refinance can be when you have an adjustable rate mortgage (ARM) and you refinance to lock into a fixed-rate mortgage. This protects you from an increase in future interest rates, which would cost you money and may make it harder for you to afford your mortgage payment. Many people are taking advantage of the low rates available to refinance their ARMs into a a fixed-rate loan in order to reduce the stress and worry that comes with the uncertainty of an adjustable rate loan. Moving into a fixed-rate mortgage can help you avoid financial trouble before it starts.

4. Cash-out Refinance: Getting Money Out of Your Home

Another reason to refinance is to get money out of your house, which is known as a cash-out refinance. This type of refi allows you to access the equity in your house to use that money for other purposes. Popular reasons to do a cash-out refinance include: consolidating debts that have a higher interest rate than the new loan, making home improvements, and paying for college costs. Of course, any time you take equity out of your house, you want to make sure you assess the risks involved. Be careful that your new mortgage payment is affordable, so you don’t put your house in jeopardy.

Quick tip #2

nbsp; Are you thinking about refinancing? Bills.com provides you .

Two Reasons Not to Refinance a Home

A refinance is not an easy fix to complicated problems, nor is it an ATM for making unneeded purchases. As with anything relating to mortgages or your house, you need to be smart about a refi and know when it is not the right decision.

1. When a Refinance Does Not Save You Money

Lower rates do not necessarily mean that a refinance will save you money. An important factor is how much will refinancing cost you. Compare your costs to your savings. Lender closing costs and third party fees can add up to several thousand dollars, which can prevent the refinanced loan from saving you money. Make sure to weigh whether you are adding years to your loan, by resetting the clock to a 30-year term, when you have fewer years left on your current loan.

You also need to consider how long you plan to stay in that specific house. If you plan to move in the near term, a refi may not save you money. Talk to a mortgage professional or trusted financial planner, if you are not sure where you stand.

2. Cashing Out for the Wrong Reason

Using the equity in your home to finance a purchase or expense should only be done for important reasons. Millions of Americans used their homes as piggy-banks, during the period of time that home values were rising year after year. People used equity to finance vacations or to spend on frivolous purchases.

Before you take cash out of your home, make sure that the cost is worth the benefit. Any time you pull out equity, you increase the risk of losing your home. Using equity for home improvement projects can increase the value of your house, though you rarely get a return equal to what you spent on the improvements. Don't use your home as a piggy-bank. Using equity for luxury purchases saps the value from your home.

Summary

There are four good reasons to refinance a mortgage, and there are valid reasons not refinance, too. Everyone’s situation is different, and it is important to analyze yours before making any big decisions about your home. If you use a refi wisely, you can benefit, but knowing when to say “no” is also important.

4.0
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(16 Votes)

224 Comments

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  • 35x35
    Oct, 2012
    Jennifer
    In 2009 we were able to do a modification after much stress, lawyers, and fees. Our balance was $135,000 but after fees and such this became $145,000. But we were grateful we could save our home. This month we were going to refi with our lender, which we were lead to believe would be easy and of course costs us about $2,000. This week we were told that since we are still above the $135,000 level we can not refi even though they tacked on the fees and such to our loan. I started searching for other lenders to refi with and were told that since it is a temporary modification they cannot help us. Why? What does this have to do with anything?
    0 Votes

    • 35x35
      Oct, 2012
      Bill
      Jennifer, Your current lenders seems to be saying that your LTV is too high. Maybe that is the reason other lenders are not willing to work with you? I think the best solution is to call more lenders and pin anyone down who tells you that it is the temporary status of your loan mod that is preventing you from refinancing.
      1 Votes

  • 35x35
    Jul, 2012
    Dara
    I have a 5.75% 30-year fixed on my house. The loan is about $350,000. I want to refi to a lower interest rate, but the value of my house has dropped almost to what I owe, a bit more than that luckily. I am not underwater, but would like to know if I should bother to refi to a lower rate? I am not selling anytime in the next 15 years.
    0 Votes

    • 35x35
      Jul, 2012
      Bill
      Look into refinancing, given that mortgage rates are at an all-time low. Maybe a HARP loan would be a possibility. It does not require that you be underwater and would be a way of avoiding PMI, if you currently don't have PMI.
      0 Votes

  • 35x35
    Jun, 2012
    Brian
    I purchased my home 3+ years ago for $188,000 @ 4.875%. I was thinking about refinancing to 3.75% my question is since I first gotten my mortgage my credit score was around 730, now (after i got a divorce) my credit score is about 100 points lower. How will this reflect if I want to refinance?
    0 Votes

    • 35x35
      Jun, 2012
      Bill
      The drop in your credit score could prevent you from qualifying for a conventional refinance loan. I suggest you speak with your current lender, to see if it will offer you a streamline refinance. Your credit may not be as big an issue with them, as long as you've never been late on a mortgage payment.

      Other than that, you could look at an FHA loan, as FHA loans have less strict credit score requirements than conventional loans. You probably need a 620 credit score with most FHA lenders, although there are some that accept scores as low as 580. Make sure to factor in the costs for upfront Mortgage Insurance Premium (MIP) that come with an FHA loan.
      0 Votes

  • 35x35
    May, 2012
    Lois
    Bought my home in 1999.
    • Balance $63,000 w/ARM @3.25%
    • Value $125,000.
    • Credit score 810.
    • Want to refi to fixed.
    • I'm now retired

    Have bank offer of 15-year @3.25% locked until 7/30/12 and closing costs of $1,600. Any additional questions I should ask?

    0 Votes

    • 35x35
      May, 2012
      Bill
      Shop around. The rate strikes me as a a quarter-point too high given your LTV and credit score. Of course, I do not know your debt-to-income ratio, so if your DTI is sky-high your rate might be reasonable.
      0 Votes

  • 35x35
    Apr, 2012
    Jo
    I just received a quote of 3.75% on a 30-yr fixed or 3.375% on a 20-yr fixed. Mortgage at $363k, into it for about 3 years now. Closing costs are about $2,700. We can roll $2,400 into new mortgage. The 30-yr will save us about $372/month, but tack on 3 years to the mortgage. The 20-yr will add about $30-$50/per month and will knock off 7-yrs from the mortgage. We have no intentions of moving until we retire (another 25 years), but who knows what life will bring in the future. Which would you recommend?
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      Both quotes look good. You don't mention your interest rate, but it appears to be around 5%, so those rates are big improvements. In addition your closing costs are quite reasonable. Either way, financially it is a good deal.

      The decision you need to make is a personal one. The main factor in your decision should be your cash flow needs. Can you afford to pay the extra $50 per month or do you need the lower mortgage payment, which will put another $372 in your pocket? Do you have a rainy day fund? Are you putting away money into your retirement accounts? If your finances are in good order, then paying off the mortgage is a good long term investment. But, if you decide to go with the lower payment and longer period, then make sure you do not just spend the extra money, but also build your equity. If you have extra funds, you can then decide to accelerate your payments, or make a lump-sum payment.
      0 Votes

  • 35x35
    Mar, 2012
    Chris
    We have a 5.25% rate on a 30 year loan with around $96,000 left. We also have a HELOC at 4.5% interest only with a $30,000 balance. Would you recommend combining the two loans at a lower fixed rate on another 30-year mortgage? We're a little over 3 years into the home but we have about a 50% LTV due to a large down payment. We'll probably be in the home for a while.
    1 Votes

    • 35x35
      Mar, 2012
      Bill
      As the cliche goes, "The devil is in the details." What are the closing costs for the refinance? Closing costs determine the payback time on a refinance. Lower costs = faster payback. Get a quote and then calculate your time to payback and lifetime savings.
      0 Votes

  • 35x35
    Mar, 2012
    Lindsay
    We purchased our home a little over 2 years ago. We owe $115,000, we pay $707 a month before escrow and have a 5.875% interest rate. We have good credit high 700 range. We are considering refinancing down the road but my question is should we save $ every month to put towards a "down payment" when we refinance or should we just be sending in whatever we can towards to principle every month? I'm wondering if we saved long enough to have enough to put 20% so we wouldn't have to pay the private mortgage ins. (about $50 a month). It would take us around 4 years to do so. What will save us more in the long run?
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      If you can receive a return on your money at a higher rate than your mortgage interest, then it would be better to invest the fund rather than accelerate payments. In general mortgage rates are higher than money that can be save. There is no way to know what the interest rates will be in 4 years time. Another unknown is the future value of your home, which you did not mention in your question. However, if you bring the LTV down to 80%, you can request that the Mortgage Insurance company terminates your PMI. Their decision will be based on an appraisal report, or whatever method they use to determine the property value, at the time of the demand.
      0 Votes

  • 35x35
    Mar, 2012
    DEE
    I have a 3-year old, $90,000 mortgage. My lender got in touch with me offering reduced rate from 5% to 4%, VA, fixed, 30-yrs, no-cost to me. Would this be good opportunity or would this not be worth the lost having paid the loan for three years. This is all new to me, being a first-time buyer and all.
    0 Votes

    • 35x35
      Mar, 2012
      Bill
      When you say "no cost to me," do you mean that the lender is not rolling any fees into the loan, increasing what you owe? If the loan balance is the same, then reducing your interest rate is a clear winner.

      If fees are being added into the loan total, then you need to think about how much the fees are, how long you will stay in the home, and how long it will take you to pay off the home if you were to make the same payment you are making today.
      1 Votes

  • 35x35
    Feb, 2012
    erica
    My husband and I are in the process of building a home, which is 90% complete. We were pre-approved for a loan of 200,000. When we spoke to our lender, they informed us we had an account in our credit that was reported to the credit bureau for a no initial payment made. My husband and I tracked down the account and it turns out the company reported the wrong information, however will get it fixed on their end and report it as fixed in all three credit bureaus. My husband and I also filed a dispute. Prior to this inaccurate report, our credit report was about 730. This wrong allegation against our credit dropped our credit score by at least 100 points. Once the credit departments are notified of this wrongful allegation towards our credit from the company, how long will it take to fix and update on our credit report? I already obtained a letter from the company stating the company messed up, it was not our fault and it will be fixed at all three bureaus. I have provided this letter to our lender. Is there any way we can fix this so it wont damage our APR rate with the lender? What's the next step? The house will be finished in a week as well.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Speak to your lender about a rapid rescore. This is your best chance of updating the score quickly.
      0 Votes

  • 35x35
    Feb, 2012
    Scott
    I'm 8 years into a 30-yr fixed loan @5.75%. I purchased the home for $155k and still owe $137k. with today's market, I'd be lucky to sell it for more than $110k, but have been wanting to move for a couple years now. I've been checking into refi's, and can get a 30-yr fixed @ 4.25% and save $270/mo. I can get a 5/1 ARM @ 3.25% and save $350/mo. My question is, should I refi when I intend to sell my home as soon as I can at least break even?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Your breakeven point would be about 12 to 18 months, if your closing costs are about 2%.

      I understand from your question that you are underwater, your loan balance is larger than the value of your home. It is impossible to tell when the market will change and you will be able to sell the house at a price that will allow you to repay the loan.

      The type of loan you take will depend on both the amount of risk you like to take and the monthly payment you wish to take. If you wish to reduce the monthly payment as much as possible, then a 30-year ARM mortgage will accomplish that goal. However, if you are refinancing through the HARP program, then you will be limited in your choices, as an ARM is possible, only when your LTV is 105% or less. If your current monthly payment is manageable, then you might want to refinance into a 20-year loan, which would keep about the same payments, but pay off the loan a little quicker than your current loan.
      1 Votes

  • 35x35
    Feb, 2012
    Brittney
    My husband and I purchased our first home on Dec 31, 2009 with a 30-yr fixed FHA loan in the amount of $260,200 @5.25%. Our current principal balance is $251,565 and we are currently looking to lower our monthly payment (now $1,985) in preparation for a baby. We plan to live at our residence for at least another 10 years then maintain as rental/income property. Our credit is fairly good (his in high 600's and mine in low 700's), and we have a few thousand dollars saved for closing costs. With this being our first home we have very little knowledge about the housing industry. Any assistance on if/when/how we should go about refinancing would be greatly appreciated.
    0 Votes

  • 35x35
    Feb, 2012
    Dev
    Here is my situation
    • Purchase price: $389,000
    • Downpayment: 20,000 (5%)
    • Amount financed: 370,000
    • First mortgage: 320000
    • 80% of purchase price at 5.25% - I am paying little extra towards principal so 30 year term is reduced to 17-18 years
    • Second mortgage: $50,000
    • 15% of purchase price at 7% and this is a balloon loan where I am actually paying extra to finish this loan in 5 years otherwise there is a big payment at the end of the loan or I have to refinance that big payment)

    My income is very good. My yearly has gone up really well and I expect it to stay that way for many years. My credit score has improved from 650s to low 700s (705).

    My house is actually appraised at $635k - for local property tax purposes. ( I bought it from the bank) Smaller house right across my house sold for 575k.

    I got an offer for refinance from Bank of America for 4.375% for cash-out refinance where they are willing to refinance me for existing appraised value of $635k. Should I go for it? If not what are other options? Should I refinance cash out or just for my existing total mortgage?

    1 Votes

    • 35x35
      Feb, 2012
      Bill
      You should definitely refinance both mortgages, if possible. A balloon payment loan carries many risks, if you are planning on staying in the property, or need to sell it and the price drops. The bank will not use the appraised tax value, but will send an appraiser. The actual appraised value will determine the amount of loan available. It is a good idea to take the new loan for a time frame that allows for comfortable payments and to make accelerated payments, either monthly or in lump sums. I would also advice you to shop around, and get a Bills.com Quick Quote.
      0 Votes

  • 35x35
    Feb, 2012
    Rafaella
    We owe $407,000 on our house that we bought in 2008 on a 5.5% mortgage. We refinanced in 2010 with a 5/1 arm at 3.8%. We plan on living here at least another 8-10 years. We're thinking about refinancing again with another 5/5 ARM at 2.8% with $10,000 in closing costs paid through PenFed. The main reason is to lower our monthly payment about $250 p/m for a year and then maybe settle into a fixed rate in about a year while rates are still low. Do you think this is worth doing or should we stay put?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      It sounds like a good idea to refinance at today's low interest rates, especially to get out of an Adjusted Rate Mortgage. It is not so clear why you would want to get into another ARM, unless you want to benefit from the lower interest rates for the next 5 years. There is certainly no guarantee that rates will be low in a year from now. Also, you don't want to pay heavy closing costs now and then in another year. I recommend that you shop around for a fixed-rate mortgage. If you wish to pay less, then you can refinance for a 20-year loan. If however, you wish to save money on the first 5 years with a 5/5 ARM, then realize that you may lose those savings when it comes time to adjust the interest rate.
      0 Votes

  • 35x35
    Feb, 2012
    Meghan
    My husband and I purchased our home about 1 year ago. It was a short sale, and we got a great deal on it. However, the short sale took a long time and we got the approval after our lock in date for our mortgage rate. Our mortgage rate is 5.5% and we put 20% down. Our monthly payment is $590.50 includes Principal Interest Mortgage Insurance. With taxes and all our fees we pay $934.80 a month. At the time of the purchase of our home, my credit score had dropped as I had just purchased a new car. It was 610 when we purchased the home, it's now 720. I keep receiving e-mails for interest rates under 4% and just wanted to know if it would be worth it to refi. We will be in our home for at least 5 years, and plan to keep it as a rental property when we move.
    2 Votes

    • 35x35
      Feb, 2012
      Bill
      Based on the numbers you provided, it would take about 2 year to recuperate your closing costs. The monthly savings would be about $90 on the principal and interest, if you extend the balance to a 30-year loan. Remember, the PMI can be cancelled when the loan value is either 80%, according to the market value, or automatically when the LTV reaches 78% and you are current on the mortgage. If your property value has already gone up in value, and you will have to pay less PMI, then it might be worth refinancing today. I suggest that you shop around and get a Bills.com Quick Quote and get matched with some of the best lenders in the country based on your unique situation and needs.
      1 Votes

  • 35x35
    Feb, 2012
    Michelle
    Hello, with mortgage rates so low I was wondering if my husband and I should take advantage of it. We currently have a 15-yr mortgage with 12 years left on it. Our rate is 4.87% with $112,000 left to pay. House is valued around $280,000. Payment includes our taxes & insurance is around $1,427.00. We plan on staying here for many years. Is it possible to get mortgage loan under 15-yrs? and is it worth it? We don't want to extend our years on our mortgage.
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Yes, you can get loans for a shorter term than 15 years. For instance, there are 10-year loans available. You can also look into loan programs that allow you to customize your loan term, such as Quicken's YOURgage. You could also get a 15-year loan and make a monthly payment large enough to pay it off in the 12 years you currently have left.

      At today's rates, you should definitely look into refinancing.
      1 Votes

  • 35x35
    Feb, 2012
    Renee
    My husband and I are trying to refinance our home and are "shopping" for the best lender. We have two estimates at this time. One is considerably less. The other lender asked to see the competitors estimate in writing? Is this common and is it a good idea to share this information?
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      I see no reason to not share it. What if the low-cost lender gave you quote that, by accident, forgot a costly item? The more expensive lender might actually be cheaper, and it is better to learn of this mistake now than at closing. (I speak from experience on this matter!)
      1 Votes

  • 35x35
    Jan, 2012
    nate
    I have a $210,000 FHA streamlined loan initially at 6% we refinanced 2 years ago to 5% for 30 years. My loan officer called today saying we could refinance again to 3.85%, saving near 150$/mo. I plan on staying here indefinitely. I don't like resetting my 30 years like this having done it once. Also I am concerned that somehow this will mess up my credit with all of my activity of refinancing etc. My question then is refinancing to this lower rate a good idea given my situation being so early in a 30-year loan or should I be content with 5%. Thanks!
    0 Votes

    • 35x35
      Feb, 2012
      Bill
      Harm to your credit score is no reason to avoid a refinance. Any impact caused by the hard pull will be negligible in the short term, and not noticeable in the long term.

      I understand your concern about resetting and resetting your maturity date. That would be a financially significant concern if you were 10 or so years into a 30-year loan. I have two thoughts:
      1. Accept the offer to refinance, but instead of pocketing the $150 per month savings, apply it to the payment. I did not run an amortization table, but my guess is by doing so you will retire your loan in 25 years or so. On months when money is tight, pocket the $150 and pay off your surprise expense.
      2. Ask the loan officer about a 20-year loan. Your payment may be about the same as your existing loan.

      Compare your offer to today's refinance rates.

      0 Votes

  • 35x35
    Jan, 2012
    Melissa
    I have a mortgage in my ex-husband's name. When we purchased the home, we got a better rate without my name on the loan. We are now divorced, and I got the home in the divorce. Can I refinance this loan in my own name? If so, how do I do this?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      To refinance the home in your own name you will have to qualify for a mortgage loan based on your financial situation, including your income, credit score, and debt to income ration. In addition, the current home to value ratio will be a factor in what type of loan you can get. If you are approved for a loan, then your lawyer can aid you in the details regarding transferring title. I recommend you read the Bills.com article about refinancing a mortgage loan to receive detailed information about qualifying for a loan. You can then proceed to receive a mortgage quote.
      0 Votes

  • 35x35
    Jan, 2012
    Maria
    Our current home value is now $260,000 and have a 1st mortgage of $230,000 (30-year fixed w/5.625%). We are now on our 7th year and currently paying $2,120/month. Our lender offered 4.375%/30-year fixed, a payment of $1,807/month or 4.625%/20-year fixed with payment of $2,148/month. The closing cost is $1,400. Should we go with 30 yr or 20 yr? One more thing though, we are planning to sell the house in 6 years. Any advice would be appreciated.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      First, please check the interest rates which you were quoted. In general 20-year interest rates are lower than 30-year interest rates. The closing costs of $1,400 is reasonable and check that all the costs are included. The decision to go with 20 vs. 30 years, depends on your goals. If you wish to lessen your monthly payment, then you want to go with a 30-year loan. If you wish to save more money and pay off your loan earlier, then go with the 20-year loan, or even a 15-year loan, which would have a lower interest rate. I am not sure how you arrived at your monthly payments. Do they include other costs than the principal and interest? Do you currently have PMI? Will the lender require PMI on the new loan? These costs could influence the cost of your loan. In addition, shop for a loan. Contact one of Bills.com pre-screened refinance partners for a free, no-hassle mortgage quote.

      Lastly, it may be worthwhile to consider a 7-year ARM, as the interest rates will be even lower.
      0 Votes

    • 35x35
      Feb, 2012
      maria
      Our monthly payment includes Homeowner's Insurance and County Tax, a total of $646. We have no PMI and the lender is not requiring one. We are also underwater as we owe $69,000 on second mortgage. I'm still confused, we definitely want to save more because we have a son in college that we are also helping right now.
      0 Votes

    • 35x35
      Feb, 2012
      Bill
      Without knowing the amounts that you owe, it is difficult to give a precise answer. However, based on the numbers you provided, I assume that you do not have a large first mortgage. You can try to refinance that loan, but if you are underwater, will be unable to refinance the second loan. If spreading the first mortgage into a long term loan will lower your monthly payment enough, then it might be worthwhile to do a HARP refinance. However, the closing costs might make this expensive.
      0 Votes

  • 35x35
    Jan, 2012
    Tesa
    my house is worth less than what I originally bought it for. In addition, I refinanced 3 years ago, and used up the equity and now I owe that money on top of the original debt. The mortgage payment is so high that I moved out and now have a renter. The whole thing is a head-ache, and I don't know what to do.
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      Your basic options are to:
      1. keep making the payments
      2. try to refinance using the HARP program, or
      3. attempt to modify the loan with the lender.
      0 Votes

  • 35x35
    Jan, 2012
    maureen
    I own half a house can I get a morgage on my half?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      Yes, in theory. However, in practice, the mortgage business has been in turmoil the last four years or so, and you will probably need to work with a small, local bank to find such a loan.
      0 Votes

  • 35x35
    Jan, 2012
    Vicki
    Hello, I have a home loan with a balance of $33,000, int. rate of 5%. I plan to stay in the home until it's paid off and now my pmt is $564 with just over $400 going toward principal. I can get a rate of 3.5% if I refinance (I would like lower payments (on the remaining balance), but would like to pay the house off in the same time period)... Since I've been paying on the house 11 years, if I refinance, the amt. of pmt going toward principal would go back to nearly zero for some years as when I first financed. Is there any advantage to refinancing a home at this stage in the game where a person owes less than half of what it was purchased for? I don't want to lose ground and spend $'s on interest unnecessarily. Thank you!
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      If you refinance your loan for the same time that you have left, in your case 11 years, and at a lower interest rate, then your monthly payment will go down and your overall interest cost will decrease. Your principal payment portion will actually increase. This is all true if you keep the same time frame and do not refinance into a loan for a longer period.

      However, given the amount of money you owe, you should check carefully the closing costs on the loan. Since there are fixed costs as well as variable costs, it may not be worthwhile to refinance.
      0 Votes

  • 35x35
    Jan, 2012
    Richard
    I am in the process of purchasing a home. The MIP for this purchase will be about $200 a month. How long until I can refinance and get rid of the MIP payment?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      The amount of mortgage insurance you pay depends on the size of the loan. I recommend that you read the Bills.com article about FHA mortgage insurance and post any additional questions you have on that page.
      0 Votes

  • 35x35
    Jan, 2012
    Selvna
    I have a mortgage on my co-op. The balance is $106,237.52, 7% interest rate, 30-year mortgage, monthly payments $751.79.I am considering refinance for a lower rate. What is the best refinance option? Refi with no cash out, or cash out and reinvest the cash?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      I need more information about your loan to give you a go/no-go recommendation on a refinance. For example, if you are in year 4 or 5 of your loan, then a refinance is worth your time to investigate. However, if you are in year 15 or 20, then refinancing to a new 30-year loan would be a bad idea. Go to the Bills.com refinance calculator for a quick, no-nonsense analysis of your circumstances.

      Resist the urge to do a cash-out refinance to buy luxury items or, as you hinted, invest elsewhere. I say that because if you say "investing" and really mean speculating in the stock market or otherwise trying your hand as a day-trader, your chances of success are slim.
      0 Votes

    • 35x35
      Jan, 2012
      Lore
      Your refinance calculator won't let me enter my specifics (step3) nor will it allow me to recalculate.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      Lore, we apologize for the frustration. You are correct that there is a bug in our system and we are working to fix it. Thank you for letting us know! We will email you directly, when the issue is resolved.
      0 Votes

  • 35x35
    Jan, 2012
    Brooke
    I currently have a home equity loan in the name of myself and soon-to-be-ex-husband. I am buying our home and need to refinance it into my own name. Seeing that mortgage rates can be lower than home equity loan rates, is it possible to go back to a mortgage?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      A plain old mortgage or deed of trust would be a better choice than a home equity loan or HELOC for the circumstances you described.
      0 Votes

  • 35x35
    Jan, 2012
    Jason
    Started out with a $105,000 30-yr, fixed-rate mortgage at 5%. I am currently a year and a half into it. I pay $200 extra on principal a month. I am considering refinancing to a 15-yr 3.125% fixed rate. What should I do?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      By doing accelerated payments of $200 per month, you will cut your loan down to a little over 16 years. However, by refinancing, you will have less overall monthly payments, than your combined regular payment plus your additional $200, and you will have a lower interest payment, of approximately $145 in the first payment. This amount decreases over the life of the loan but would total over $22,000 if you carry the loan the full 15 years. It will take about 7 months to recuperate each point you pay on the loan. By refinancing to a 15 year fixed mortgage, you will be making approximately the same payments as you are currently doing, which include your extra $200 per month. If you plan on maintaining the loan for at least 18 months and you can commit to the higher payments, then refinancing is a great option.

      Given today's historically low interest rates, I recommend that you get a Bills.com Quick Quote.
      0 Votes

  • 35x35
    Jan, 2012
    Rafael
    Currently owe $185k on my house. My interest rate is 6.950%. I was checking out bankrate.com and notice many lenders that offer around 4.00 %. I have great credit. Is it possible to take out $20k and get the better interest rate and still lower my monthly? I currently pay $1277 a month. With the $20k and the interest rate drop, I should be around $1000 a month. That sounds pretty good to me. That's possible?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      Now is a good time to refinance, as the mortgage rates are at historically low levels. Since you mention that your credit score is great, the other major factors that the lender will look at are your:
      1. debt to income ratio
      2. loan to value ratio

      It is possible to do a cash out refinance, if you have enough equity in the property. A conventional loan would require an 80% LTV.

      I recommend that you contact one of Bills.com's pre-screened refinance partners for a no-cost, no-hassle mortgage quote.

      0 Votes

  • 35x35
    Dec, 2011
    Annisia
    I currently owe $122k on a property I rent out during the summers as a vacation rental. The home is valued in the $275k-$300k range. The mortgage is considered my primary residence and it was when I purchased the home. We now rent in another location and use it as a vacation home/income property. We would like to buy a new home in the area where we currently rent but also would like to refinance the income property since our current 30 year fixed loan is at 5.375%. Is is possible to refinance this property and then within a few months purchase a new home. I have talked to mortgage agent and qualifying for the new home is not the issue. I just worry about the credit hit and the refinance so close to a new mortgage. I am hurting my chances to get the best loan for my new home.
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      You have several moving parts in your situation that may impact your go/no-go decision to refinance the property. First, the existing loan was almost certainly written with the condition you would be a full-time resident in the property. You are no longer an owner-occupant, and would be considered by a mortgage underwriter as an investor. Owner-occupant loan rates are less than investor loan rates. Therefore, refinancing may not result in a rate lower than your present rate.

      Second, you do not mention how far you are into your present loan. If you are within the first 10 years or so in a 30-year loan, then refinancing to a lower rate will cut your monthly payments and lifetime interest costs. The later a borrower gets into a loan the less sense it makes to refinance because the cost of refinancing exceeds the interest costs saved. See the Bills.com Refinance Calculator to weigh the costs and benefits of a refinance.

      Regarding your question, assuming my two concerns are moot, the impact the hard pull will have on your credit score will be negligible if you have a score in the 800s. If you are in the low 700s, then the hard pull may pull you down from the A-paper range. What is your credit score today?
      0 Votes

  • 35x35
    Dec, 2011
    Jerry
    We currently have a 15 year at 5.3% interest. Owe 303,000 and home appraised at 340,000. Looking at a 30 year at 4.75%. Payments would go from 2700 to 2500 (based om PMI, taxes and insurance added to 30 year)and we are debating on waiting until we have more equity or pulling the trigger now. Any advice?
    0 Votes

    • 35x35
      Dec, 2011
      Bill
      It is not clear why your payment on a 15 year mortgage, refinanced to a 30 year payment would go down only $200. Based on interest rates you provided, the monthly payment difference should be about $863. If you are not paying PMI today, and you will be required to pay in the future, then add those payments. You are probably already paying taxes and insurance.

      Whether you wish to refinance or not would depend on the reason you are looking to refinance. If you cannot afford your monthly payments, then you should consider refinancing to a long term loan, which should provide a much lower monthly payments. If you are looking to save money, then consider a fixed rate loan, at a 15 year term, like your present loan. Today's rates are very low, so you should be able to do much better than 4.75%. Remember, the decision to refinance will also depend on the time horizon you wish to stay in the home. The shorter the period, the less economical it is to refinance, due to the closing costs.

      As regards your question regarding refinancing now or building up equity you will have to weigh today's low interest rate and your current need to take PMI, against the amount of time it will take you to build up that equity and the possibility that interest rates will go up, or your home value decline. Even if you refinance today, you can build up equity and make prepayments, in order to bring you LTV down to a rate that will allow for the cancellation of the PMI.

      I recommend that you look for today's refinance terms through a Bills.com Quick Refinance Quote.
      0 Votes

  • 35x35
    Nov, 2011
    I Have a 20YR Mortgage AT 7%....Want to get equity and refi...OWE 24,000, appraisal at 31,000... Month pay 213.00...I want to pay some credit card debt...Good Idea? Need Advice TY
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      You are asking two different questions: the first relating to refinancing your 7% mortgage, and the second relating to dealing with your credit card debt.

      1. Refinance: I suggest that you talk to a local bank regarding the possibility of refinancing your 7% mortgage. Although today's interest rates are cheaper, the closing costs on a new loan may make refinancing an unattractive alternative.
      2. Credit Card Debt: Since you are currently at 80% LTV, you will probably not find a cash-out refinance loan available. In addition, you should be careful before moving short term unsecured credit card debt to a long term mortgage loan. Bills.com offers much information about debt relief. I suggest you start by reading about credit card help.
      0 Votes

  • 35x35
    Nov, 2011
    Lynette
    We purchased our home in June of 2006 for $215,000. It is now worth approximately $120,000. Although we have excellent credit our 30 year fixed rate is 7.25% with Lender Paid PMI built into the loan. Will we be able to refinance under the new HARP program with LPMI? I am reading so much conflicting information. We meet all the other qualifications with no problem.
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      Yes, the new HARP guidelines allow for refinancing at a LTV of over 125%, if you take a fixed rate loan up to a 30-year term.

      According to Fannie Mae, in its November 15, 2011 FAQ bulletin, Mortgage Insurers (MI), are supportive of the new program, and showing flexibility for refinancing loans they currently insure. Since these are new guidelines that will go in effect for loans applications after December 1, 2011, keep abreast of HARP developments on Bills.com HARP refinance page.
      1 Votes

  • 35x35
    Nov, 2011
    Fred
    Thinking about refi on my home.Have excellent credit and equity.Recently had home for sale, but just took it off the market,would that effect my ability to get a refi,home equity?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      If you are looking to do a rate and term refinance, then there should not be a problem, once you remove your home from the for-sale listings. If you are looking to take cash-out, you may have to wait a number of months, from three to six months on average. Shop around, to see what you find out.
      0 Votes

  • 35x35
    Nov, 2011
    Belle
    We currently owe $120k on a rental property (used to be primary res.) House was just appraised at $550K. We were interested in refin. with cash out to purchase another residence (we currently live in parsonage). Our rental income would cover the amount of new loan. Worse case scenario, the rent stops, would we just lose the rental/collateral, or would we lose the new property too. Is this a bad idea?
    0 Votes

    • 35x35
      Nov, 2011
      Bill
      The worst case scenario in the case of a default would involve two steps:

      1. The property being sold (short, sale, deed-in-lieu, foreclosure) without sufficient funds to cover the balance of the loan.
      2. The lender aggressively pursuing you for the deficiency balance through a court judgment. This can lead to  liens on your personal property, bank levies, and wage garnishments.

      If you could not make payments on one loan, the lender, in the case of a default, can place a lien on the other property. That does not mean that you would necessarily lose the property.

      However, weigh the risks against the benefits when making your financial decision.  You would have two properties, your rental income, your other sources of income against the cash-out refinance mortgage and any other purchase mortgage that you make take. Learn the real estate market. Plan correctly and ensure that you can make the monthly payments, even if the property is not rented at full capacity or at a lower price. It is certainly a good time to refinance, due to the historically  low interest rates. This is true even if you are not doing a cash out.

      Our Quick Quote page can help you find great mortgage lenders ready with rate quotes on the best loans for your situation.

      1 Votes

  • 35x35
    Oct, 2011
    FunClc
    I have a 30 year, 5.375 rate, 8 years into it, owe $123k, value about $300k. Original mortgage was $153k. I pay $812 per month for principal/interest presently. Looking to refi for 20years @ 4.125, about a $60 per month savings, will take about 23 months to pay back closing costs of $1200 to $1400 ( I am refi with same bank that holds mortgage now). My question is: the new mortgage will be monthly payments of more interest than principal, so, will my pay down of mortgage take more time. My goal is to pay off ASAP, and save money. I could be at my house a year to 10 years, likely not more. Are there calculators to figure this out, I have not found any? Thanks
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Savings: It is true that it will take 23 months to pay back your estimated closing costs, however that is just based on a projected cash flow based on the difference between your new payment and your old payments. True savings will be derived by calculating the difference between your financial costs, including your interest payments and your closing costs. According to calculations I made your break-even period would be about 10 months. The savings will derive from either a lower interest rate or a shorter period.

      Monthly Payment: The ratio between the interest payment and the principal payment will depend on the length of the loan and the interest rate. The interest portion is almost always higher than the principal portion and the ratio decreases as you pay off the loan. Since your refinanced loan would have both a lower interest rate and a shorter period, then the portion you will pay on the interest will be lower than that on your current loan.

      Time Horizon: Since the break-even point on financial savings will be about 10 months then you will be ahead by refinancing. The longer the period that you stay in the house (or hold on to the loan) the more worthwhile it is to refinance.

      Refinance: Although a 20 year loan will both reduce your payments and also save you money, it is possible that a 15 year loan, based on today's low rates will not cost much more than you are paying today and also have the added benefits of saving you money and paying off your loan even quicker. Based on the information you provided you should definitely look into refinancing. I suggest that you apply for a new loan and check if offers you receive are better than those your lender offered.
      0 Votes

  • 35x35
    Oct, 2011
    Ashish
    I bought by house in Jan 2011. I have taken a 30 yr fixed rate loan (4.875 %). Is it a good idea to refinance at this time ?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      The answer depends on the details of the refinance loan for which you qualify.
      • What is your credit score?
      • Your loan-to-value on your property?
      • Your debt-to-income ratio?
      • Your income history?
      • Closing costs?
      • The interest rate offered?
      • How long do you plan to own the property?

      See the Bills.com mortgage refinance calculator for a no-cost, no-gimmick, assessment of your circumstances.

      As I write these words in mid-October 2011, the average 30-year fixed-rate mortgage is now below 4%, which is the lowest in recent history. It is almost a full point below your present loan, which, depending on the size of your loan, may result in a significant savings in interest expense.

      0 Votes

  • 35x35
    Oct, 2011
    Valorie
    I own 323,999.60 on my mortgage which is an interest only loan at 4.625% for five years which ends on 5/1/2013. With interest rates this low, would it be wise to refi now for a 30 year fixed or wait till the five years are up. I have been paying an extra 50 to 100 per month on my payments. Also, should I deal with my present lender thinking I might get a better deal or go elsewhere?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Difficult for me to answer your question without knowing more facts. Go to the Bills.com mortgage refinance calculator to get a customized go, no-go recommendation based on the information you provide.
      0 Votes

  • 35x35
    Oct, 2011
    Jay
    I purchased our home around April 2010 for about $165,000 at a rate of 5.25%. I still currently owe a little over $162,000. The home was valued at about $160,700 earlier this year, but that was before some modifications were done, so a new inspection will be needed. My monthly mortgage is about $1,315 without any extra going to the principle. After the recent storms I had to take out a loan to do some repairs, so money is a bit tight now. I've been contacted by my lender about refinancing due to the new low rates going on and would like to know if this is a smart move or not. He say's that the lowest rate possible is about 3.75% but if he was to lock me into a 4.25% interest rate that they could pay most of the closing costs for me. This is currently a 30 year fixed rate mortgage and unless better options are available, it will stay that way if I refinance. I hope I have provided enough information, thanks in advance for your advice.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Time to run the numbers:
      • Existing Loan. A 30-year, 5.25% loan with what I assume is a starting balance of $165,000 results in a monthly principal and interest expense of about $910. You mentioned a $1,310 payment, and I assume the $400 discrepancy is due to your paying insurance and taxes into an escrow account. The total interest expense at the end of 30 years would be about $163,000. To date, you have paid about $13,500 in interest.
      • Proposed 30-year Loan. A 30-year, fixed-rate $162,000 loan at 4.25% will result in a monthly principal and interest payment of $797. You will pay about $94,000 in interest at the end of 30 years. Assuming a "no-cost" refinance, which as you point out you are really paying for in a higher interest rate, the interest expense at the end of 30 years will be about $124,900, or about a $25,000 lifetime savings.

      Cutting your interest rate a full 1% is a no-brainer. You will keep about $113 in your pocket each month, and save a significant amount in interest expense. Later, when your financial picture improves, you can increase the amount you pay each month, which will shorten the loan term and cut the interest expense even more.

      0 Votes

  • 35x35
    Oct, 2011
    Edward
    For the past 9 years I have been locked in at 6% interest for a 30-year mortgage. I have been paying $100 above principal for that time. My starting balance was $160,000 and currently have $122,000 left. If a lock in now with 4.25% interest with a 30-year mortgage, will I save money during the total duration of my loan?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Time to run the numbers:
      • Existing Loan. A 30-year, 6% loan with a starting balance of $160,000 results in a monthly principal and interest payment of about $960. Assuming a $960 payment, the total interest expense at the end of 30 years would be about $185,400. To date, you have paid about $81,000 in interest. You mentioned paying an extra $100 per month. Wise move! By paying an extra $100 per month since your first payment, and assuming you continue to do so, you will cut your 30-year loan to a 23.5-year loan, and will pay a total of $138,900 in interest expense.
      • Your Proposed 30-year Loan. A 30-year, fixed-rate $122,000 loan at 4.25% will result in a monthly principal and interest payment of $600. You will pay about $94,000 in interest at the end of 30 years. A refinance of this amount will cost $1,500 to $3,000 in closing costs, and an unknown amount in points. I will assume 2 points for the sake of argument, bringing your total cost of the loan to about $5,000 or perhaps less.
      • My Proposed 15-Year Loan. Consider a 15-year, fixed-rate loan. The average rate as of mid-October 2011 is about 3.6%. A $122,000, 15-year fixed would result in a $880 payment and a lifetime interest expense of $36,000. Again, like above, a refinance would cost $5,000 or less.

      If you can afford a $900 payment, a refinance to a 15-year loan would result in a $100,000 savings in interest expense as compared to your existing loan, and leave about $160 per month in your pocket. See the Bills.com Find Your Best Rate form to get no-cost, no-obligation, no-gimmick quotes from pre-screened lenders.

      0 Votes

  • 35x35
    Oct, 2011
    susan
    Hi, I currently hold a mortgage@ 5.785% fixed rate(original 30yrs). My home value is estimated @ 295K and I owe 132K. I am considering refinancing to a lower fixed rate @ 15 yrs. My research shows that I would be paying 6K+ in closing fees which would also included prepaid property taxes, homeowners insurance,etc. I plan to remain in my home for 5-10 years and will retire within 13 years. Is it worth it to pay the fees to refinance at a lower rate and shorter term? Also, I have, comfortably, paid an additional 200.00/month toward the principal on my current mortgage for the past 7+ years and made a significant reduction in the balance owed. 7 years ago, I owed 185K. My recent credit score is 825+ and am diligent about protecting it. So is it a wise choice to refinance considering the previously noted facts? Many thanks!
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      Time to run the numbers:
      • Existing Loan. I need to make several assumptions based on incomplete information provided. I will assume a 30-year, 5.785% loan with a starting balance of $185,000, and 7 years into the loan. If my assumptions are correct, the monthly principal and interest payment is about $1,085. The interest paid to date is $71,200, and assuming no extra principal payments, the lifetime interest expense will be about $205,000. You mentioned paying an extra $200 per month. Again, assuming the loan started 7 years ago, and you added $200 to every payment, you will cut your 30-year loan to a 22.5-year loan, and pay a total of $131,700 in interest expenses.
      • A 15-Year Loan. The average rate for a 15-year fixed-rate loan as of mid-October 2011 is about 3.6%. A $132,000, 15-year fixed would result in a $880 monthly payment and a lifetime interest expense of $27,300.

      Let us assume a $6,000 cost for the refinance. The break-even point is at about 30 months — 2½ years — so even if you stay in the property on the short end of your 5-10 year range, you are money ahead refinancing at today's bargain rates.

      0 Votes

    • 35x35
      Nov, 2011
      Meredith G
      We are "upside down" in our home currently following hurricane Katrina & with the decline of value (appraisal) of our home. Our current interest rate is 6.25% and we are looking to bring that rate down a couple of points. Is there a way to drop the interest rate on a mortgage with all of the refinancing fees with the new legislation and guidelines as of today Nov 15th??
      0 Votes

    • 35x35
      Nov, 2011
      Bill
      The new HARP program will allow for refinancing, under more liberal underwriting rules, for loans that are more than 125% of the current property value. Your last 6 monthly mortgage payments have to been made on time, and you can only have been late on one payment in the last 12 months. For more information and updates on the HARP Refinance program, see the Bills.com HARP refinance page.
      0 Votes

  • 35x35
    Oct, 2011
    Denise
    If I purchase a condo (cash purchase), how long must I wait before I can take out a HELOC?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You need not wait at all.
      0 Votes

  • 35x35
    Oct, 2011
    Betty
    We will be closing on a new home purchase in just a few weeks. We have locked in for 4.25% for a 20 year loan. Of course rates have dropped again, and we have found another loan for 3.75% for 20 years. We would like to go ahead with the first closing then re-finance at the lower rate, as it has no closing fees. Is there a law that requires us to wait a certain amount of time before we re-finance? We have heard a new law went into effect, two weeks ago, that require us to wait 120 days before re-financing, but can't find any information concerning this law. Do you have any information about this?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      I am unaware of any law that sets a minimum time limit on having a mortgage or deed of trust before you must refinance. However, review your loan contract to see if you agreed to wait 120 days before you refinance.
      0 Votes

  • 35x35
    Oct, 2011
    Jonathan
    I purchased a house on December 2010 and got a 30 year FHA loan for $430,000 with a fixed interest of 4% for 5 years only. Would it be a good idea to refinance the house when my 5 years is almost over or should I do it now? I am really trying to save up as much as possible and lower down my mortgage payment because I'm paying $2800 a month including taxes and insurance. Any advise on how I can improve my mortgage and save money will really help right now. Thank you
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      As I write these words in mid October 2011, the average interest rate on a 30-year fixed-rate mortgage is 3.94%, according to Freddie Mac's weekly survey. This is the first time in modern history that 30-year loans have been below 4%.

      I think it makes good sense to look into locking in a fixed-rate mortgage, while rates are so low, in order to protect yourself from future hikes in the interest rate, if you are planning to stay in the house for a long time. If there is a good chance that you will move in 5-7 years, I would hold pat.

      However, getting a fixed-rate mortgage is not going to lower your monthly payment significantly. I don't see a way to lower your monthly payment, unless you pay down your principal balance with a lump sum, aside from looking for an interest-only loan.
      0 Votes

  • 35x35
    Oct, 2011
    Neera
    I own a condo. There is no mortgage on it because it was purchased with cash, so I own it outright. How does cash-out refinance work in a situation like this, where you already own the property?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You do not need a cash-out refinance. You need an home equity loan or a home equity line of credit. Follow the links I just mentioned to learn more and to find great deals on these loans.

      If you were taking out a large amount, you could look into a first mortgage. If your mortgage is drawing on equity in your home, as opposed to adjusting only your rate or term, it is a cash-out mortgage.
      0 Votes

    • 35x35
      Oct, 2011
      Neera
      Even if the amount of money needed is a significantly large amount? I always thought HELs or HELOCs were only used when you needed smaller amounts for things like home improvement projects or to pay off some other higher interest debt (i.e. credit cards). We're looking for financing for a business, so would a HEL or HELOC still be ideal?
      0 Votes

    • 35x35
      Oct, 2011
      Bill
      From a legal perspective, a mortgage, home equity loan, home equity line of credit, and second mortgage are identical fundamentally. All are contracts for secured loans where the security is real property and the property owner has personal liability to repay the amount borrowed. Lenders market these loans as separate things, but remove the advertising and hype the loans are really the same. My point is, do not let marketing distract you from your goal, which is to use your real property as security for a loan.

      My advice?
      1. Talk to several banks and credit unions in your area about your business plan and idea to mortgage your home to fund its start up. Your interviews will uncover a loan officer with business smarts and ambition who will make it clear his or her bank or credit union is friendly to small businesses.
      2. Consult with a lawyer who has experience in setting up business organizations. Until recently, this was called "corporations," but the legal community is trying to stop using that word because there are several ways to set up the legal framework for a business, and not all are corporations.

      I wish you well in your venture.

      0 Votes

  • 35x35
    Oct, 2011
    Maui
    What information does the bank need from you when you want to refiance your house? Do they need to know about your bills that you have othere than you gas,electric etc. Do they need to know about visa's and etc?????
    0 Votes

  • 35x35
    Oct, 2011
    Marie
    My husband and I bought our home in 2002 and had to get a home equity line of credit with our local credit union. All in All we owe about $250,000. Our first Mortgage is about 197,000-we qualified for the making home affordable and paying 2% interest for the next 2 years and it will go up to what we were at before 6.75% in about 5 years. Our 2nd Morgage or Home Equity is 10% interest-We have a balance of $53,000. With the interest rates the way they are would it be worth to refi? The value of the house is not even close to what we owe, but we want to keep our home. Any suggestions?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      I cannot answer your question without knowing more about your situation. What is the fair market value of the property today? How long do you plan to reside in the property? What are your credit scores? See the Bills.com refinance calculator for a fast analysis of your situation.
      0 Votes

  • 35x35
    Oct, 2011
    David
    Hi, I have a 1st mortgage with 114,000 at 6% which is already on the arm and a second mortgage as a line of credit (home equity) for 52000 at 7%. The house at the time was assessed at 170,000. I just got my assessment for this year at 150,000. Is there any option at all I have for refinancing? We owe about 165 and the house is only worth 150 now. We'd love to get one of them fixed at least, but I don't know if there is any way. My credit score is around 650. Thanks
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You mentioned you received an "assessment," which I will assume is the value your county tax assessor affixed to your home. I advise homeowners to ignore the tax-assessed value, unless it is absurdly high. County tax assessors, generally speaking, do not even drive by the properties they assess, so the values they concoct are guesses at best.

      Go to a Web site like Zillow.com to see what comparable homes in your neighborhood have sold for in the last six months or so. Look at your property critically. Is there deferred maintenance you need to catch up on? Have you added features to boost its value?

      A 650 score is not terrible, but if you want a great rate you need to focus on boosting your credit score.
      0 Votes

  • 35x35
    Oct, 2011
    Jonathan
    Hi - I am interested in refinancing my primary mortgage. The rate is 5.75%, the balance is about $190,000. My question is whether my second mortgage (really a home equity line) with about $19,000 left on it, will impact the rates/terms I get in the refi. In other words, should I pay off the home equity first (goal is end of the year as I have been pre-paying), then refi? Will that give me better refi terms, or do they not even look at the second mortgage? I hope I explained this well. Thanks for your help!
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      The key issue when refinancing a first mortgage, when you hold a second mortgage, is the lien position. When the current first mortgage is paid off in the refinance, the second mortgage advances to first lien position.

      The new mortgage lender is not going to be willing to be in a junior position for a $190,000 balance to the current second's $19,000. You either have to refinance and pay off both current loans, rolling them into one new loan, or get the second mortgage to agree to subordinate its position, letting the new mortgage move into first lien position ahead of it.

      Once you are in conversation with a loan officer, you will get a better idea of what kind of rate you can get and how to go about getting a subordination.
      0 Votes

  • 35x35
    Oct, 2011
    Donald
    We have a FHA mortgage on our house for $120,000 and owe about $113000. The loan is only about one year old and is at 5.5% for 30 years. We are trying to get a conventional loan because we want to cut the number of years down to 10. I understand that the FHA loans do not go that low. The question I have is would we quilify for a conventional loan for 10 years in our situation. Our credity rating is excellent.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      You don't say what your home is worth or your state of residence. Most lenders will not go above 90% for a conventional rate and term refinance, with the limit being 85% in some states, and 80% in Texas.

      If you have sufficient equity, then go with a conventional loan. If not, you could refinance to an FHA 15-year loan and pay it off on a 10 year amortization, if you think that the best use for your money.
      0 Votes

  • 35x35
    Oct, 2011
    Sunny
    We purchased a small home in 2008 for $26000 (a deal from relatives) and an interest rate of 5.25%. We have done quite a bit of work to the house and we believe it is definitely worth more than $26000. (When getting the loan they projected the house to be worth about $50000) Would now be a good time to refinance, since rates are as low as 3%? We are a young family, with me being the only that works while my husband is at school. Any advice would be greatly appreciated.
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      A problem may be finding lenders willing to make loans for as little as you owe. Fees may be higher, because of the amount of profit a lender can make on a low-dollar mortgage.

      I don't think you have anything to lose by speaking first with your current lender (unless your relatives financed the loan) and then with a local bank or credit union. Local institutions may have a greater understanding of the property values in your area and want to develop a relationships with local borrowers.
      0 Votes

  • 35x35
    Sep, 2011
    Carol
    My husband and I would like to refinance our mortgage,but we keep getting denied due to our credit scores which are in the high 500's. Our 1st mortgage balance is 365,000 at 6.5 % and our second is 100,000 at 12%. We have not been late in our 1st, but have been late paying the 2nd. Are there lenders that work with people in our situation? Thank you.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Your best bet is looking around for an FHA loan. FHA loans have more lenient credit score requirements. The FHA will guarantee loans for borrowers with scores over 580, but many FHA lenders require an even higher score, for their own reasons. Therefore, you need to keep checking with different FHA lenders until you can find one that will work with you. It is possible that your mortgage lates on your second mortgage will disqualify you.

      You did not mention what your home is worth in today's market. To get an FHA loan you will have to meet both loan-to-value and debt-to-income requirements, too.
      0 Votes

  • 35x35
    Sep, 2011
    Lee
    My sister lives in Albuquerque & bought a new house almost 5 yrs ago. The payment was affordable for her at the time but someone dropped the ball after the house was built & her property taxes have skyrocketed making her payment too much for her & she takes out of savings every month to make it. She tried to qualify for a lower rate with the Making Home Affordable as she pays more than 31%. She pays 51% of her income on her mortgage. Anyway...being as she had never been late or missed a payment she was not approved. Now with the rates so low she wants to refi but does not like the bank who currently has her mortgage. She does not have the $ to pay closing costs & will have to roll them into loan. Her current loan is @ %5.75. My question is will she have to come up with a down payment to refi with another company? She put a hefty down payment on her home to avoid mortgage insurance & does not want to pay it now.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      When she speaks with another lender, her 51% debt-to-income ratio may prevent her from qualifying to refinance. Her current lender may not require a full application that examines her income, using her past payment record as sufficient proof of her creditworthiness.

      The question you asked is about her loan-to-value. Because she already owns the home, it is not a down-payment she needs to be concerned about. Instead, lenders are concerned about the value of her compared to the balance on her mortgage. Lenders may not be willing to finance more than 85-90% of her home's value, depending on her location. If her loan balance was at 95% of her home's value, for instance, she would have to pay down the balance in order to get a loan. That is not a down-payment, strictly, but is still money out of her pocket.
      0 Votes

  • 35x35
    Sep, 2011
    Yvonne
    We bought our $400000 house in 2007 with a house loan of 300000 15 years at 6% rate. Since then we have refinanced twice. Now we have a loan of 240000 at 4.5% 15 years. The closing fee that is offered at my bank is 1500. The purpose of refinancing for us is to save money and pay off the mortgage faster. Now the 12 year loan at 3.125%, should we refinance again? How will three refinancing in 4 years affect our credit score and are we saving moeny at all?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      It depends on how you define saving money. If you are looking for the lowest total cost, it makes good sense to refinance. It will take you about six months of interest savings to recoup your closing costs of $1,500. However, your monthly payment will be higher on a 12-year loan than on your current loan. If you refi'd to a 15-year loan, you would lower your payment and save money over the course of the loan, too, but not as much as the overall savings of the 12-year loan.

      There should be no harm to your credit report, as long as you've been paying your payments on time.
      0 Votes

  • 35x35
    Sep, 2011
    Scott
    I have 2 mortgages, 1st one is around 41,000 and 2nd is about 13,500. Together my payment is right at 2k a mth. The house appraised in dec 2011 for 143,000. It has been a tough couple of years and the mortgage company I'm with will only go by last years tax returns and will not refi my loan because I didn't make enough money last year. My credit score is in the high 700's and I pay my bills on time, all the time, However I have got to get this mortgage payment under control before that changes. I desperately need some help. Could you please give me some advice? Thanks
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Some lenders will offer a 'streamlined' refinance, where no appraisal or income verification is needed, provided the borrower is making his or her payments on time and the new loan lowers the monthly payment. If your lender is not willing to work on this basis, and you don't have income to meet standard debt-to-income ratio requirements, it is going to be difficult, if not impossible, to find a refinance loan. If your current loans were FHA loans, there is an FHA streamlined refinance program that would help you.

      Given your strong equity position, as disquieting a suggestion as this is, you may have to consider selling your home, if you find yourself unable to sustain your mortgage payments.
      0 Votes

  • 35x35
    Sep, 2011
    SHARON
    We have a 30 year fixed rate mortgage at 5.875% with 26 years & 9 months to go and a balance of $178,900. Should we refinance? Also, would it be smart to refinancing to a 15 yr mortgage?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I don't have enough information about your situation to give you complete advice. What are your goals? You can certainly lower your mortgage payment, if you qualify for a loan at today's rates. You ask whether it makes sense to refinance into a 15 year loan. If you are confident that you can afford the payment today and throughout the life of the loan, it makes sense to consider. How long you plan to stay in the home is another factor to consider.

      Were I in your position, I would certainly look into refinancing, starting by contacting one of Bills.com's pre-screened mortgage providers.
      0 Votes

  • 35x35
    Sep, 2011
    George
    I have a 1st mortgage, $327k balance, rate at 5.375% my 2nd, $62k balance is at 8.5%. Due to the lower property value if I consolidate I would have to pay approx $100/monthly in PMI. The rate would be at 4.5%.
    0 Votes

  • 35x35
    Sep, 2011
    Ken
    Hello. We re-located 14 months ago and unfortunately will be moving again in next 12 months (job related). Mortgage was roughly $250K at 5.25%. Should we re-finance to a short term arm if we are here less than 12 months? Thanks.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Almost certainly no. If you planned to stay in the property for 4 years or so, the answer would be an almost certain yes, but 12 months is not enough time to see a return on the cost of the refinance.
      0 Votes

  • 35x35
    Sep, 2011
    Melissa
    Hi. We have one mortgage with a balance of around $163 k. Our rate is 6.25% & our house is valued at at least $180 K. My partner is in school & our mortgage payment is now a real struggle with the other bills. We would like to move in 3 yrs. if possible & toyed with he idea of renting the house out if we cannot get what we need to pay off our loan (the comps in my neighborhood are horrible). Would it be a bad idea to refinance my home and refinance my mortgage since the rates are so much lower than what I have? My credit score is in the hight 600s and my partner's is 730. I would be the main borrower as I am the "bread winner" & she only works part time. Any advice you could give me would be a HUGE help & very appreciated. Thank you.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Whether it makes sense for you to refinance depends, in part, on the costs you will be charged. Given that you are planning to move in 3 years, you should look into a 3/1 Adjustable Rate Mortgage. An ARM makes good sense, however it also has risks. If you don't end up moving, your interest rate is likely to go up in three years.

      How sure are you about the 180K value? If comps in your area are terrible, your LTV may be too low to qualify for a loan. If that is the case, check with your current lender to see if you can do a streamlined refinance and also keep your eyes on the news, to see if Pres. Obama announces a new refinance program for underwater homeowners.

      One other thing to keep in mind is whether or not you are paying PMI right now. If you refinance, you are going to have to pay PMI. If you don't pay it now, having to pay it could wipe out any savings from the lower interest rate.
      0 Votes

  • 35x35
    Sep, 2011
    victor
    We owe about $45000 on our home mortgage at a 6% interest. We have a 15 yr loan and I think we are supposed to be finished paying it off in about 4 years. Our payments are about $950 a month for principal and interest. Should we try to refinance to get a lower interest rate and if so what is the best refinancing plan ? Thanks!
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      You likely are paying so much principal and so little at interest at this point, 11 years into your 15 year loan, that the costs of refinancing outweigh the benefit. If your only goal is to save money, as opposed to lowering your interest rate or doing a cash-out refinance to consolidate debt or for some personal use, I recommend standing pat.
      0 Votes

  • 35x35
    Sep, 2011
    Marie
    Husband and I purchased our home 5.5 years ago for 105K with an interest rate of 6.375%. Approx. 2 years ago we took out a home equity line of 16K for renovations/debt paydown. Our home is currently valued at $120,000 and we owe $97K on the mortgage and $14K on the equity line. Is it possible to refinance mortgage and roll the equity line in? We've made all mortgage payments on time but have fallen behind with other bills and credit scores are around 600. Is it possible to refinance with such a poor credit score? It is necessary that we trim monthly expenses wherever possible.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Never say never. I am not optimistic you will find a refinance given your credit score, but it never hurts to try. Start with the Lowest Rate Page to get a no-cost, no-gimmick, online quote from a Bills.com pre-screened partner.
      0 Votes

  • 35x35
    Sep, 2011
    Jason
    House bought for $224,000 with 30 year fixed rate of 5.65% in 2006. Got $165,000 left on the mortgage. planning to stay more than 7 years . At what rate should I refinance or should I refinance? Im planning to refinance 30 year fixed with at least 4% rate. thanks
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      Time to run the numbers:
      • Existing Loan: I will assume you put down 20%, and that your original loan amount was ~$179,000. A 30-year, 5.65% fixed-rate loan results in a $1,034 monthly payment. The total interest expense at the end of 30 years will be ~$193,186.
      • Proposed 30-year loan: A $165,000 30-year, 4% fixed-rate loan will cost $2,900 to $4,900 in closing costs, and an unknown amount in points. I will assume 2 points for the sake of argument, bringing your total cost of the loan to about $6,000-$9,000. Assuming all of these facts, your new monthly payment will be about $816, for a total monthly payment savings of $218. The overall interest expense savings will be $70,290. It will take you about 27 months to 41 months to recoup the cost of refinancing.

      Do you plan to own the property for more than 3.5 years? If yes, then you would be foolish not to strongly consider refinancing.

      0 Votes

  • 35x35
    Sep, 2011
    Tom
    Hi, I am interested in a refi. I bought my home in 2009 as a foreclosure. The original FHA loan was for 245k. Over the last 2.5years i have renovated the home to a point where it is now very nice. Assuming I can get the home appraised for around 300k, some homes in my area are still holding that price, I think I can get out of the PMI payments and a lower rate. My question- Is there a way to refinance my home and use some of the extra equity to pay off the remaining 4k on my car loan. The car has another 2ish years left on it at 8%.(3yr refi last summer to get out of "first time buyer 15%")
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      You can certainly apply for a cash-out refinance loan, seeking to roll in the $4,000 left on your car. The key will be your home's value. As you mentioned, whether or not you will pay PMI is a key factor. If your LTV is 80% or less, you will avoid PMI. If the only way to avoid PMI is to keep the car out of the loan, it may make sense to refi without including the car. I suggest that you speak with a loan officer, after contacting one of Bills.com's pre-screened lending partners.
      0 Votes

  • 35x35
    Sep, 2011
    Dorothy
    We purchased our home in 2006 for $305000. First mortgage of $250 with 7%ARM and 2nd of $55000 with an 11% fixed rate. At the time we were rebuilding our credit and were assured we could refinance in a couple of years. Three years later we were able to get the 1st at 7% to accept a fixed rate of 7%. We have not been late on anything for over 5 years now and have rebuilt our credit to around 720-730. However our home is now valued around $240000. I have been unable to get anyone to discuss refinancing with us being as upside down as we are currently. What recommendations can you make to help us? Feeling frustrated that we could get help if we stopped paying and fell behind but no help because we have not fallen behind.
    0 Votes

  • 35x35
    Sep, 2011
    Catalina
    Our 1st mortgage is about $250k, with 5.375 APR. We have a 2nd mortgage, about $34k, at variable rate, now 3%. Our house is worth about $450k. The rates have gone down enough now, we're considering refinancing. If can get 3.75-4% rate, should we do it? We have money, in stocks, to pay off 2nd mortgage, but would probably loose about $4k selling stocks now. Should we role 2nd mortgage into refi?
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      There are a few variables you left out that would allow me to make a more complete analysis, such as how long you have left to pay on the current loans and how long you plan to stay in the home.

      I recommend refinancing the first. You can choose to roll in the second, but its low size and your ability to pay it off, if needed, make it less important. I see no harm in rolling it in, but the savings are to be had on the larger first. Look for a new loan that runs a comparable length of time to what you have left on your first now. It will probably take two years or less to recoup the costs of the loan, depending on the loan you take. If you take a shorter loan, the long term are greater, but the monthly payment will be higher. If you take a longer loan, you'll reduce your payment, but pay more over the life of the loan. Your goals will guide you to choose a shorter or longer loan.
      0 Votes

  • 35x35
    Aug, 2011
    stephanie
    I guess I am not in the same 'category' as most people that commented here..but need some advice. We refinanced our mortgage in 2007 with Beneficial with no escrow and a 12% int. rate. They were supposed to reduce our rate for every year. I am now unemployed and wanted to refinance somewhere else, only to find that our personal loan with Ben. defaulted. 'They' told me to go with the default and our int. rate on the loan would reduce from 22% down to 9%. Little did I know, this placed a lien on our property so now we are having trouble refinancing unless the new bank is willing to subordinate the lien. Help!
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I don't understand your question. How can you qualify for a refinance when you are unemployed? Also, a new lender does not subordinate a lien. It is a current lien holder that must agree to subordinate its position to the new lender, as the new lender will not make a loan and accept second position to another lien.
      0 Votes

  • 35x35
    Aug, 2011
    Andy
    I currently have a 80/20 mortgage for original loan of $219,900. The 80% mortgage is a interest only 5/1 arm for 175k at 6.125% with a payment of $897.93. The second mortgage is a interest only fixed 15 year balloon. The house is currently worth $162717. The bank will give me 105% of the value in a 30 year fixed refinance of the first loan. So I would end up paying about 9k in closing cost and to pay to be able to refinance the first loan at a rate of 5.75% at $997/month. So my thought is that it would be a good way to be a little more stable by being able to pay interest and principal on the first loan while still being able to pay the 2nd mortgage and hope our home value goes up or try to pay it down. Is this a good strategy? Are the rates good enough with the amount of cash I need to pay upfront to be worth it? Or should I wait to see what my new payment will be in April and just go from there? I would greatly appreciate your input.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      I don't think the key factor is where you interest rate will be in April, but where it may be a year or three down the road. How long do you plan on staying in the home? The longer you plan to be there, the more sense it makes to get into a long-term stable situation. Interest only and balloon payments are not for the faint of heart. Another factor is whether you can afford to come up with the necessary lump-sum without draining all your reserves.
      0 Votes

  • 35x35
    Aug, 2011
    kris
    My spouse wants to refi our home to get cash out and purchase another home in another state of same value by putting 20% down on second home. We then either rent the first home for two years, or sell it. My spouse makes $140,000 has $200k in IRA. The first home we owe $150, the refi is for $190 and its value is $240. The home we want to purchase is $185K with $60k down if we refi or $30 if we don't. We owe zero on cars and have very little on cc and only have 2 cc, too. This causes great stress to me. Moving is for the educational benefit of our kids.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Let's review the information you presented look at the areas you should consider.

      Your situation at a glance:
      • You are purchasing a new home and wish to sell the current home in a short period of time. Therefore, you will be paying off the current loan in about 2 years.
      • Your new home is worth $185,000 and you have available $30,000; however you mention putting down 20% which is $37,000.
      • You do not mention the terms of your current loan, including interest rate, monthly payment, or duration.
      • You also mention that you would cash out $40,000, but have available $60,000 for the down payment. It is not clear why you wouldn't have at least $70,000. What will you use the other $10,000 for?

      Areas to Consider:

      • Down payment: You would probably wish to get the LTV on the new purchase down to at least 80%, so you avoid paying for PMI (Private Mortgage Insurance). The 20% down payment you need to avoid PMI on a home you buy for $185,000 is $37,000. The $30,000 you listed would leave you with an LTV of 84% and a need to have PMI. If you don't have the 20% and need to raise more money, then using your current house is certainly an option.
      • Saving money: Cash out refi or HELOC/second mortgage: The time horizon of holding onto your current loan is very short. This would be a good reason not to do a cash out refi because you would be paying closing costs on the whole loan. Of course this would depend on the terms of the current loan and what you can receive today. Check out the Bills.com refi calculator to see if refinancing your loan would save you money, without considering the extra money, because in case you will be borrowing that to finance the other home. Check out our articles about HELOCs and HELOCs vs. a cash-out refi.
      • Lowering your monthly payment: You should look carefully at the total monthly payments that you will have to make on the combined loans. If your current loan is relatively high and you need to lower the payments, then the refi would help by extending the number of years to repay, thereby reducing the monthly payment. You mention that the current loan will be repaid by rental money. Do you have reserves in case the rental money doesn't come in on a timely fashion?
      • Equity stake in current home: If you do a cash-out, to increase your down payment, then remember that you are decreasing the equity stake in your current house. Consider carefully the possible fluctuations of property values in the area of your current home, so that when you sell the property you will have sufficient funds to repay the loan in its entirety.

      This analysis does not look at the long-term economic benefit of your kids attending a better school system.

      1 Votes

  • 35x35
    Aug, 2011
    Dana
    We have 3 year left until our ARM adjust. We owe 172k and our house's value is at about 135K. my mortgage company is willing to refinance 105% of my home value but not 125% and recommends that I refinance when the rate is low. However, a friend advised me not to bring the money in and wait and see. I am borrowing money from a friend with 3% APR interest that we will pay off in 3 years. What should I do at this point? We have no issues paying our current mortgage and not having any financial issues, but I am worried what will happen after three years. Please advise. Thank you.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I understand your concern about your adjustable mortgage. Rates are so low right now and who knows where they will be in three years? I think it is reasonable to assume that rates will be higher than they are now.

      Borrowing from friends is fraught with peril, in general. What would happen to your friend if something occurred and you were unable to repay the debt?

      It is tough to advise you, without knowing more about your finances and how important it is for you to stay in your home.
      0 Votes

  • 35x35
    Aug, 2011
    Jenni
    I would like your advice on a kind of complicated refinance question. I purchased a house with my sister about 3 years ago, but she would like to get off of the mortgage and move elsewhere. Our current rate is 6.5% and a refinance would pretty much be the only way to release her from the obligation. I might be able to qualify for the loan myself, but am concerned that tighter lending standards in today's economy will make that difficult. I also have student loans that are currently deferred, but becoming due in several months. Do you think it would be advantageous to refinance now if possible before my loans come due and while rates are low? Also, will the rental income from two renters I will have at the property aid in qualifying for a refinance on my own?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Lenders are likely to count your student loans as part of your debt-to-income ratio, even when they are in deferment, as the loans are going to be a required obligation during the time you will be repaying the loan.

      Most lenders do not count what is called 'room rent' as part of your qualifying income, so I do not believe the rent you charge your renters will be used.

      That being said, you should speak to a loan officer to find out where you stand. Rates are so low right now, you should refinance if at all possible.
      1 Votes

  • 35x35
    Aug, 2011
    Erin
    I owe $92,000 on my mortgage with 5 years left until it is paid off. My interest is 5.875% (I haven't refinanced). Should I refinance at the lower rates now...or just keep paying the high interest that with a principal reduction payment for the next 5 years to get this paid off? Also, is it possible to just refinance for 5 years at the lower rates? I don't need to pull money out.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I would definitely look at a refinancing. Look at adjustable rate mortgages, if you are confident you can pay off the balance in five years. Compare rates for a 5/1 ARM to a fixed rate loan. If you know that the rate can't adjust for five years and you strongly believe you can pay it in full by then, that is a great option.
      0 Votes

  • 35x35
    Aug, 2011
    Becky
    We have a 5% FHA loan, balance is 208k. We don't have enough equity to get a conventional loan yet and would still need to carry PMI. Is it a good idea to get an 80-20 loan to avoid PMI? We can get a 4.125% rate on the new loan, drop PMI, and have 18k (which includes 2k closing) as the second loan - line of credit tied to PRIME. We'd be able to pay that off in 5-6 years most likely. Monthly payments would stay the same but money would be used smarter (ie paying less interest, no PMI). Any downside to 80-20?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If you have the opportunity to the 80-20 loan at the rates you stated, I don't see the downside. I was not aware that such loans are being offered these days. What lender is offering you 100% financing to you?
      0 Votes

  • 35x35
    Aug, 2011
    Mark
    I have an interest only, 30 year fixed loan at 6.125% on a condo with a principal of $235k. Monthly = $1096. (This is the primary loan in an 80/20 and have lived there 4 years.) The bank who owns the loan contacted me about refinancing to a conventional, 30 year fixed loan at 4.875%. They said this would raise my monthly to $1156, but would give me the advantage of paying down the principal each month and getting a reduced interest rate. My out of pocket is a $500 appraisal and the estimated closing costs of $1800 will get rolled into the loan. Does it make sense to do, and should I talk to a broker instead of working with the bank directly? Is there anything to consider on my second loan? What is the banks incentive in this scenario? Thanks, Mark
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Short review:
      1. The numbers you provided don't make sense to me. The payment is too low for a loan on $235,000. You say your interest only payment at 6.125% is $1,096, but I calculate a payment of $1199. I also don't see how a 4.875% rate will yield a monthly payment of $1,156. I get $1,244.
      2. Are you saying that your loan is set to pay interest only for the entire 30 years? I am not familiar with that kind of loan. Perhaps you're saying that the loan is interest only for five years, then becomes a principal and interest loan and your payment will adjust?
      3. There are no details on your second mortgage, the piggyback loan. Therefore, the main focus of my reply is on your primary loan

      Items for you to check:

      1. Payment on current and proposed loans.
      2. Your existing loan terms
      3. Your LTV: how will a new appraisal affect the LV? Has your property decreased in value, as so many properties have, over the past four years?

      Factors to consider:

      1. Time horizon to hold your loan
      2. Your goals

      Now, let's dive deeper.

      The bank has an incentive in moving you from an interest only loan to a loan that has principal payments. This is in order to reduce their risk exposure. As property value has decreased the banks have been left in positions with many borrowers underwater.

      However, your main concern is your own wellbeing and gaining tangible benefits from the refinance. In order to determine this, you must be able to define a time horizon that you wish to hold on to the loan and the goals that you are trying to achieve.

      Before I can answer your questions you should check the following items:

      1. Your Monthly Payment: According to my calculations, based on the numbers you provided, you should be paying $1199 per month on your current loan. If refinanced at 30 years at 4.875% then the payment would be $1244. Recheck the numbers on your existing loan and on the proposed loan!
      2. Your Existing Loan terms: Check and see if your loan is interest only for the whole 30 years. Perhaps there is a time when it will change and your monthly payments will increase accordingly.
      3. Your LTV (Loan To Value ratio): You originally financed 100%. What is the current value of your house? Will the appraisal report affect the bank's offer?
      4. Your piggyback loan: In order to analyze all of your options you must know the terms of your second loan, including balance, time left, interest rate, monthly payments and other terms which might be variable. Your second loan will likely need to agree to subordinate its position, in order for you to refinance. If it is held by another lender, then you should factor this into your plans.

      In general, according to my calculations you will be paying about $44 more per month. However you will be saving $250 just the first month on interest payment (before tax deductions, if they exist). It would take about 10 months to recoup your closing costs. If you are planning on staying in your house for more than 1 year, then the refinance would be worthwhile based on costs. Your cash flow would be minimally affected, increasing by about $45 per month. However, your equity position in the house would be improved by about $3,545 for the first year. Plus, your savings and equity position will improve as time goes on.

      1 Votes

  • 35x35
    Aug, 2011
    Carl
    We have $200,000 left on a 15 year mortgage at 4.45%; house is worth $600,000; credit is excellent. Evaluating whether or not to refinance given historically low rates (15-year 3.25%, etc.) We plan on being in the house 10 more years. With lower payment we would likely pay more on principal every month. Should we refinance to a 15-year or 10-year loan?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If there is no doubt in your mind that you can afford the 10 year loan's monthly payment, I think it will be the best option, because it will have the lowest interest rate.
      0 Votes

  • 35x35
    Aug, 2011
    bethani
    I have a 30-year VA loan for $153,900 with a 4.75%. I am a first time home buyer and have only been in my house for a year. I wanted to know what the pros and cons were for me to refinance from my current lender to my credit union that i bank with. I was looking into it and they offer interest rates as low as 3.87%. My mortgage payment is $967 per month. It would be nice to have some extra money. I called my credit union and asked about it earlier this year and they told me I would have to pay closing cost,etc. They are now advertising an offer to pay up to $2,500 towards closing costs. I am new at this and I need some advice.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      One advantage of a VA loan, for qualifying borrowers, is the low down payment requirement. The loan from the credit union likely requires you to have at least a 20% equity stake, so your home has to be worth more than $193,000, to get the lowest interest rate they offer.

      You have nothing to lose by contacting the credit union and making an inquiry. If you are eligible for the best rate available, then you need to see if there are any costs at all, such as an appraisal, for example, and see if the savings are greater than the costs. Look at the size of the new mortgage payment in comparison to your old one. Is the difference significant. How many months would it take for the savings on the new mortgage to add up to what the loan costs you?
      0 Votes

  • 35x35
    Aug, 2011
    Marcia
    I have a mortgage of $195,500 on my condo with a 5.25%, my old loan officer called and offered a 7 year loan with a 3.8% completely free, nothing to pay at settlement, additionally they were going to pull my old appraisal so there was going to be no charge or cost at all. Now, I see the documents they are sending with charges every where. total closing costs $5,000. I have called them several times to questions these charges and no one has called me back. Can I at this point cancel the loan and just stay with my old bank, if so, do i have to pay anything. I paid just $500.00 to start the loan whcih they said they would return it at settlement. thanks for your reply.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      You are asking me to comment on a loan contract I have not read. What have you signed? Where are you in the closing process? If you closed and the terms and conditions were not made clear to you, then by all means consult with a lawyer immediately. If you have not closed, then raise a fuss and get your $500 back.
      0 Votes

  • 35x35
    Aug, 2011
    Deb
    Hi I'm tying to figure out if an ARM loan would work for someone planing to pay off their mortgage earlier. Current Mortgage balance is 87,215.00 fixed 20 years 4.875 ( 12 years remaining) . Plan to do an early retirement buyout. Want to take a some money out of retirement pension( not 401K) ( i know penalties, penalties ) and pay down about 40,000 on mortgage in 2013 ( end of 1 year severance for buyout). With the lump sum I hope to get mortgage balance to 35,000. My concern is that with finding another job at a lesser salary will I able able to make the monthly payments of $1034 - everything included. If I were to take say a 5/2 year arm at a lower rate and accelerate the principal payments to pay off loan in in 4 - 5 years is this a good idea?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Tough for me to reply meaningfully without knowing more about your situation. In general, I dislike the idea of liquidating a retirement account for the reasons you mentioned, although using the funds to reduce your mortgage balance is the least-bad reason to do so. Have your property values held steady over the last 5 years? What are the prospects for the real estate market in your area? If you needed to sell your house today, could you? How much, if any, equity do you have? What are your other retirement funds?

      Putting all of your eggs into one basket, your house in this instance, can be risky. It is safer to diversify your risk if you are nearing retirement age.
      0 Votes

    • 35x35
      Aug, 2011
      Deb
      Hi Thanks for responding. I'm in Florida so property values have plummeted. I bought before the real estate craze and when I refinanced I took no money out so I have equity in property maybe about 45,0000 on the low end. Yes house would sell. Other retirement fund is a 401K which is not being touched and is being rolled over into an IRA to avoid penalties. The pension plan would still have funds which I do not plan to access until 59 1/2 to avoid any further penalties. I'm 47 so I plan to continue working. The plan is once house is paid off to save more aggressively by maxing 401K contributions and other saving options. I have no credit card debts or other loans. I have excellent credit but did not want to refinance with a 10 or 15 year loan. My goal is to pay the house off in the next 3- 5 years so the premise of the arm is to lower interest with more towards principal to stay within my 5 year plan.
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      You have clearly thought things through. If you are not being penalized for taking the funds out of your retirement, then your strategy seems sound. You certainly can get some amazingly low rates on ARMs in today's market.

      I could not tell for sure if your earlier comment meant that the non-401(k) withdrawal is penalty-free or not. If it is not, then you have to run the numbers, comparing your savings by refinancing and paying down the mortgage aggressively versus the costs of the penalties and taxes on the withdrawal.
      0 Votes

  • 35x35
    Aug, 2011
    Becky
    We have a 30 year FHA loan, 5%, great credit, 3k cc debt - have had the home for 2 years, no late or missed payments ever on anything. Thinking of refinancing to get down to 4% hopefully - would you recommend that or just stay where we are? Is it easy to refi an FHA loan? We may not need PMI now if they house has appreciated a bit. It was new construction 2 years ago. Thanks!
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      With interest rates where they are today, it certainly makes sense to look into refinancing ASAP. You should look at an FHA streamlined refinance, as it is fast, easy, and will save you money. No appraisal is required.If you truly feel that your loan balance is less than 80% of your home's value, also get a quote for a standard refinance loan. If you don't have to pay PMI, a standard refi may be a better option.

      Run the numbers, once you get your quotes, to see if the savings of the refi exceed its costs, factoring in how long you plan to stay in the home.
      0 Votes

  • 35x35
    Aug, 2011
    gregg
    I have an 80/20 home mortgage,the 1st I owe 247,000 @ 4.25% for 10 more yrs. My 2nd is for 50,000 @ 7.36% for 25 years. Should I combine these For 3.25 for 10yrs or just pay extra payments on small loan to pay it off in 10 yrs. I show by making extra payments on the small loan it would be 100 dollars less a month. Any recommendations ?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      I don't know what costs you are being quoted for the loan, but I like the refinance option, if you are planning to stay in your home.
      0 Votes

  • 35x35
    Aug, 2011
    Jon
    I am looking for advice. I have a 30 year fixed FHA loan for 187,000@5.125% taken out 2 years ago. I can refinance it for 165,000@4.125%, refinance costs will be around 7-8K. I plan on paying off my loan regardless in 10 years (I am adding a few years in case of life events). Is this worth it?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      The costs you listed, $7,000 to $8,000 seem quite high. Have you shopped around? If you feel confident that you can afford the payment, I recommend that you look at taking out a 10 year loan.
      0 Votes

  • 35x35
    Aug, 2011
    Tia
    My ex and I own a home together and I would like to refinance to remove him from the mortgage. However the property value on the home is dropping due to the state of our economy. What can I do? Selling the house is not an option since no one is buying.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      You can look into an FHA loan, where you can borrow up to 96.5% of your home's value, if you meet the income and credit requirements. If your home is worth less than what you owe, I don't have a good solution for you. You can speak to your lender about reducing the principal, either on its own or through an FHA Short Refinance, but most lenders seem to turn a deaf ear to such requests.
      0 Votes

  • 35x35
    Aug, 2011
    Michelle
    I have a fixed mortgage rate of 5.75% 30 year. My total mortgage is $788 per month (includes everything).I only owe $95K on the house. I've owned the house for 5 years. I have 3 credit cards debt totaling about $30K. I pay $720 per month on all 3 cards. My student loan payment is $162 per month. Car payment is 300 per month. I have never been late in paying anything. I have 2 side businesses and a full time job (all of which I love doing). I would love to refinance to pay off the credit card debt. Is this a good idea. I have about 5K in my checking.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      You did not state the interest rate on your credit cards, your income, or the value of your home. Without all the facts, it is hard to advise you what is your best option.

      Given today's historically low interest rates, I think it is worthwhile to look into refinancing and consolidating some of your debt. Prioritize the credit card debt, as you seem inclined to do, especially if it is at a high interest rate. Be less concerned about the car loan, as there are negatives to turning short-term debt into long-term debt.
      0 Votes

    • 35x35
      Aug, 2011
      Michelle
      Oops, sorry abouth that. 1st Credit card interest rate is 8% (owe 17k), 2nd credit card interest 10% (owe 7K), 3rd cred. card interest 14% (owe 7K). Of course my home value went down but I don't know the exact amount. Not worried about student loan or the car payment. Last year I got a great deal on a 2004 Lexus ES 330 36K miles for 15K. I had a toyota corolla for 15 years and it was starting to cost too much for repairs and it wasn't reliable anymore (I gave it to my brother, who's still driving it at 200K miles).
      0 Votes

    • 35x35
      Aug, 2011
      Michelle
      Forgot to include my annual income of 44K per year. I'm very frugal, love Goodwill and consignment shops. Credit card debt soared when I purchased a commercial cleaning franchise. The franchise wanted to charge 17%, whereas my credit card was 8%. Other debt was already there. Once out of credit card debt, it won't ever, ever, ever happen again. Usually I am very good with my finances. Have always had good credit.
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      Based on the interest rates you just listed, I think that refinancing to the lower rate in a cash-out refi is a great idea, especially when you are clear that you are not going to run up credit card debt again.
      0 Votes

    • 35x35
      Aug, 2011
      Michelle
      Thanks, I will look into this!
      0 Votes

  • 35x35
    Aug, 2011
    Lee
    MD resident. I am looking to consolidate debts by refinancing my home. My house is currently valued at $300,000. I owe $36,572. 00 @5.5%. Pay 833.35 monthly. I have excellent credit with a salary of 70,000. Into the new loan will go a home equity loan balance of $25,445.00 @ 5.99%; personal loan balance of $3,997.85 @ 9.65%; a car loan of $19,909.64 @ 4.89%; son's student loan of $5,500.00 @ 6.75. I was quoted a fixed 10 year 3.5% rate, 3.65% APR on Monday 8/8/11. New monthly will be about 940.00. My closing cost is about $3,500.00. Thought of throwing this into the new loan as well. How much is this loan going to cost me? Is this a wise ReFi? Except for two credit cards totaling under 2,000, I do not have other debts. However, my daughter's student loans totaling approx. 40,000 show up as liabilities on my report. Her payments are current. Does this harm my loan?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      Consider the pros and cons of turning unsecured loans (and a car loan) into a loan secured by your house. Plus side: lowering your interest rates and saving money. Down side: consolidation is always a touchy issue. If you don't reform your habits, you will run up more debt and make your situation even worse. Also, turning unsecured debt into secured debt inceases your risk. If you aren't able to keep up with your mortgage payments on your new loan, your house will be at risk for foreclosure.

      There is missing information regarding your monthly payments on various loans (or duration of loan). It makes it hard to compare your existing payments to a newer payment. The refinancing of the current mortgage into a 10-year loan would increase the loan from a 4-year loan to a 10 year.

      The new monthly payment does not seem correct based on his information:
      • Balance $90,424
      • Interest rate: 3.5%
      • Duration: 10 years

      Payment should be about $894, and not $940 (maybe some escrow?). I assume also that his mortgage payment is just principal and interest.

      The closing costs seem high, at 4%. Two percent is the range we see.

      If your goal is to alleviate your cash flow at the expense of carrying an higher balance throughout the loan and carrying overall higher nominal financial costs, then this would seem to be appropriate. Although it would take about 2 years to recover the closing costs through the reduced interest payments. (This is due to the longer duration in the loan). Of course, the monthly expenditure differential would cover the difference in a very short period of time.

      0 Votes

  • 35x35
    Aug, 2011
    Lily
    I am looking to refinance my home and cash out $30,000 to pay some loans and use the rest for home improvement. The value of the home is $189,00, my mortgage loan balance is $100,000, @ 6.5% interest and I have good credit rating, The dilemma is to refinance for 20 yrs at 4.0% interest or 30 yrs at 4.25%.. The 30 yrs will lower my monthly payments and it is enticing; however, I feel I am taking a step backwards, since I have 20 yrs left on my loan. Any suggestions?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      If you are at all concerned about your ability to make the monthly payment on the 20 year loan, I advise against it. My suggestion is to refinance to 30 years and pay it more aggressively than is required. That way, you get the low interest rate, won't be at risk of losing your home by committing to a payment that may be too high to make, and will pay off the loan sooner than 30 years.
      0 Votes

  • 35x35
    Aug, 2011
    Shara
    We added on to our house right before the market dipped. We have a 7-year ARM now that is coming due in a few years. As everybody else's house has, I'm sure it has dropped in value. Is the best way to find out if you meet the value needed to refi to go ahead find a potential company to refi and pay for an appraisal? Our credit is great, that's the only concern I have.
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      The only way a lender will process a loan application is if the borrower pays for an appraisal. If you want a quick and unofficial market valuation, go to Zillow.com and search for recent sales on comparable homes in your neighborhood.

      Regarding refinancing the ARM, the rates now are very low, and are unlikely to stay this low forever. Apply for a refinance now to learn where you stand.
      0 Votes

  • 35x35
    Aug, 2011
    Mike
    I recently took a new job in a new area where we have to relocate. We have owned our current home for three years and our trying to figure a way to finance a new place while we sell our old home. Can I refinance my old home to lower payment, so I can afford a place in my new area of work?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      You certainly can refinance your home, if you meet the lender's requirements for income, credit, and loan-to-value.

      It is less costly to refinance when you are refinancing an owner-occupied property than one that you are no longer living in. I suggest that you check out your options for refinancing ASAP.

      Also, you can't refinance a home that is being listed for sale.
      0 Votes

  • 35x35
    Aug, 2011
    Ken
    We have $36,000 5-year @ 5.625%, and are thinking about refi'ing to a 10-year @ 3.875%, and adding $10,000 to pay off a student loan of $9,600 @ 7.99% for 10 years. Should we?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      You have to factor in the costs you will pay for refinancing, which you did not include in your question. However, if you are getting a fixed-rate, 10-year loan at 3.875%, the new loan is a good deal. Even if you were to refinance the entire amount for 5 years, at that interest rate, you would come out ahead. Your payment would be slightly higher, but you would have lower overall lifetime costs.
      0 Votes

  • 35x35
    Aug, 2011
    KATHLEEN
    I want to see about cancelling my PMI. From what I understand it should be 80% (78%) Loan to Value (LTV), but how do I figure that out? Loan $125,000. Value $152,000? Could you help me?
    0 Votes

    • 35x35
      Aug, 2011
      Bill
      To get your LTV, you divide your loan balance by the value of your home, which gives you a percentage. In your case, $125,000 divided by $152,000 gives you a current LTV of 82.2%. You will reach 80% LTV, once your principal balance is $121,600 and 78% at $118,560.

      Your lender may require proof that your property's value has not dropped and that you have not added a second mortgage.

      The Federal Reserve of San Francisco has a nice recap of How to Cancel or Terminate PMI you may find helpful.
      0 Votes

  • 35x35
    Jul, 2011
    Sannag
    I bought my house two and half years back for $250,000 @5.75 with 2% down. I am thinking of refinancing the home mainly save money with lower interest rates. I currently don’t own any other debts and have good credit rating. The current principle on my loan is $234,000. The question I have is it a good idea for me to go for refinance if I get it for a 30-year fixed @ 4.65%. Is it wise to again go for 30 years refinance loan? Since on my existing loan I have been paying mostly interest (and PMI) on principal. Will it mean I will lose the payments for last two half years. Should I instead go for a 25-year refinance loan to maximize my savings? Thank you for your advice.
    0 Votes

    • 35x35
      Jul, 2011
      Bill
      Time to run the numbers:
      • Existing Loan: $250,000 initial balance at 5.75% fixed for (I assume) 30 years. Not including any closing costs you may have added to the loan, your monthly principal and interest payment is about $1,459. At the end of 30 years, you will have paid about $275,000 in interest for this loan.
      • Proposed 30-year loan: $234,000 at 4.65% fixed for 30 years. I will assume you will spend 2 points to get to the 30-year fixed at 4.65% (but that is a guess). Points at 2% would cost $4,600. Closing costs vary from about $1,750 to $3,000, so to be conservative I will pick the higher amount. Your new monthly payment would be about $1,207, so your monthly savings would be $252. The overall loan savings is $47,097. The loan cost is $7,680, and it will take about 30 months to recoup the cost to refinance.
      • Proposed 25-year loan: Assuming the same interest rate, balance, and costs, your new monthly payment would be $1,321, your monthly savings would be $138, and the lifetime interest saving would be a whopping $85,275. It would take 55 months to recoup the refinance costs.

      If you plan to own the home for more than 4½ years, the 25-year loan is a smart choice. If you plan to own the home for less than three years, do not bother refinancing.

      1 Votes

    • 35x35
      Jul, 2011
      Sannag
      Thank you very much for your detailed analysis
      2 Votes

  • 35x35
    Jun, 2011
    STEPHANIE
    If your home is in foreclosure and one person on the loan filed bankruptcy can the other refinance by themselves? If so, is that legal?
    0 Votes

    • 35x35
      Jun, 2011
      Bill
      There is nothing illegal about applying for a loan, as long as you provide accurate information that does not mislead your lender about your identity or finances. If you have a stable income history over the last two years or so, have a high credit score, and a low debt-to-income ratio, then you will qualify. If you have a recent foreclosure, your credit score will be damaged severely, and as a consequence you will not qualify.
      1 Votes

  • 35x35
    Jun, 2011
    Tanya
    I have a 80/20 with the 80 on an interest-only ARM loan, and the 20 is a 30-yr fixed. Both have very high rates (12% and 9%). I've been trying to refi for ~3yrs, have had the home now for 6 years, never missed a payment, and taxes are current. Been to NACA. I don't qualify because I have rental property in good standing. I don't have $60K to buy down my mortgage! My lender states they don't do modifications, they didn't receive bail-out funds, and good luck. The lender of the 20% said they don't have enough interest in the property. My personal bank said they don't refi properties with 2 different lenders owning the loans. Do I just walk away from our home? I know soon as rates go back up I won't be able to hold on to it anyway.
    0 Votes

  • 35x35
    Apr, 2011
    George
    I am currently looking into refinancing our home. We are looking to go with either a 5/1 Arm or a 30 yr Fixed. We hope to move within 5yrs only if we can sell the house. Current Situation: 80/20 loan 6 years ago. 1st mrtg = 108k remaining @ 6.5% 2nd mrtg = 21k remaining @ 6.7% Twin Single Family Home Houses in our area are selling from 150-180k We are on the bubble with our loan to value probably around 82-84% We are hoping to combine them into one loan with a lower rate. Been offered a 5/1 arm @ 4.125% or Fixed 30yr @ 4.75%. Either one will bump total loan to 138k which includes 11 month escrow.

    Do either of these make sense if I want to move within the next 2 years? Or do I bite the bullet, stick with our current rates and payments (2 of them) and wait it out and sell.
    1 Votes

    • 35x35
      Apr, 2011
      Bill
      Your "I want to move in two years" statement pushed me from leaning yes, refinance to no, you will not see a return in my answer. Do the math. Go to the Bills.com mortgage refinance calculator to do a comparison.
      0 Votes

    • 35x35
      Apr, 2011
      George
      Ok, I went to the calculator. First, it didn't allow me to put both in, so I combined them into one with the higher interest rate. It said I should refinance with a 5/1 are even when I said I would move within 2 years. Did I do something wrong?
      0 Votes

    • 35x35
      Aug, 2011
      Bill
      You did the right thing by combining the two loans on the calculator.

      The reason a 5/1 ARM was recommended is that the rate is lower than on a fixed rate mortgage and you will have moved before the interest rate will adjust.

      The key question is whether you will save money or not; will your savings exceed the costs of refinancing.
      0 Votes

  • 35x35
    Apr, 2011
    Julie
    Hi, I have a house with 3.875/15 years, I want to refinance & cash out 60,000 dollar for My son tuition and be safe if we be laid off, because we don't have any saving enough for up to 6 month mortgage. Is it a better way to do that, refinance & cashing out with 4.75% / 30 years, Thanks Julie Doan
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      Impossible to answer your question without knowing:
      1. How much equity you have in your home
      2. Your debt-to-income ratio
      3. Your credit score
      4. Your income history

      See the Bills.com mortgage refinance calculator to learn more about the short-term costs and long-term savings you may find in a refinance.

      0 Votes

    • 35x35
      Apr, 2011
      Julie
      Me again: My house value is $465,000, My mortgage loan now is $242,000, Our credit is excellent. Our income total is $90,000/year for both of us. I don't have any debt, except $13,000 tuition loan for my son.
      0 Votes

    • 35x35
      Apr, 2011
      Bill
      You appear to be a good candidate for a cash-out refinance. Go to the Bills.com refinance calculator to learn what offers are available to you in your situation, the short-term costs of a refinance, and the long-term savings if you find a cheaper rate.
      0 Votes

  • 35x35
    Apr, 2011
    Kristen
    My husband and I have been living in our townhouse for almost 9 years now. We owe $80k left on the mortgage and our place is worth roughly $150k. We have done home improvements, but we really need windows, new sliding glass door and front door. We currently pay fixed 6.5% rate. With the rates down now we would love to refinance and use money to pay for the improvements and pay off some old school loans that my husband still has and pay off a high interest loan that we stupidly got over 10 years ago. We are looking to reduce our bills to start saving money. We want to get a house in the next few years. By refinancing, would it hurt our chances of getting a house in the next few years? I don't know if it is smart to use the equity to pay off bills/improvements so we can save $$ or do we stay as is, save the equity but not be able to save $$? I feel like its a catch 22. If I dont refinance, I save the equity for a house in the near future but not be able to save for "said house". If I do refinance, I lose some equity, but we are able to save $$ for the future house. I'm not sure what the smart thing to do? Please help. Thanks!
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      Remember when you were a kid in math class and the evil teacher gave a quiz consisting of word problems? My teachers defended these abominations by saying, "Life is full of word problems." Your question is perfect example of a mathematical word problem.

      I do not have the right answer for you because I do not have enough data, but here is how I would tackle your conundrum:
      1. Calculate how much interest expense you and your spouse will pay from today until the student loan is retired. My guess — note that word choice — is that if the loan is nearing the end of its term, most of the payment is going to principal and not interest. Again, it is not the interest rate that is important in this loan, it is the total expense you want to calculate.
      2. Do the same for the "stupid" high-interest loan you mentioned. Again, do not worry about the interest rate or how much you paid already, find the bottom-line on how much this will cost for you retire at your present trajectory. The Bills.com minimum payments calculator may help you here.
      3. Look at the cost of refinancing, and the expected break-even point. Use the Bills.com refinance calculator to learn the short-term cost and long-term savings of a refinance.
      4. You mentioned using some cash out of the refinance to repair and upgrade the property. Are there state or federal programs available to you to offset the cost of any energy-related remodeling? Subtract any tax rebates from your costs. Make a realistic estimate of how much value the upgrades will make to your property.

      What is the interest expense of the status quo? What is the bottom-line cost of a refinance?

      0 Votes

  • 35x35
    Mar, 2011
    susie
    I can save on the monthly payments, but i don't like the fact that i am starting at 30 years again. Because each year a little more is taken off the principal. When you refinance, you go back to the higher rate. So is it wise to do the refinance,even though the mortgage payment and the interest would be a little lower.
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      Mortgages are available in other flavors than just 30-year loans. I don't know how much time you have left on your current mortgage, but I suggest you compare the costs and benefits of a loan that is close to the term on your current loan. You can look into 15-year or 20-year loans and some lenders even offer a 25-year loan. Your monthly mortgage payment will be higher, the shorter the term of the loan, if the loan size is the same. Conversely, your interest rate drops farther, the more that you shorten the term of the loan.

      You did not specify your goals in refinancing. Are you trying to lower your monthly payment, move from an adjustable-rate to a fixed-rate loan, take cash out from equity that you have to consolidate debt or for other uses? Your goals will, in large part, determine what kind of mortgage will best help you accomplish them.
      0 Votes

  • 35x35
    Mar, 2011
    Addie
    Hello, we really need to refinance, we have equity in our house, but my husband is only making $40,000 this year. He is self employed and I do not work. What are our options, if any? Thanking you in advance.
    0 Votes

    • 35x35
      Mar, 2011
      Bill
      I understand your desire to refinance your home. Your options for refinancing are quite limited, given the facts you presented. A lender looks at certain criteria, when judging whether an applicant qualifies for a mortgage loan. The primary factors lenders examine are your household income, your husband's credit rating, and the size of the loan compared to the current value of your home. If your husband's income is not enough to qualify for the loan, I think you will have to wait until his income rises, before you will find a willing lender.
      1 Votes

  • 35x35
    Feb, 2011
    Sarah
    We currently have an ARM loan at 3.875 for the first 5 years. We are a year in. We are looking to possibly refinance my home now to a fixed 30 year loan at 5.2%. There are no closing costs. Would you recommend this?
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      I don't have enough information about your situation to provide an answer to the question you asked, "Should I refinance my mortgage from an adjustable rate mortgage to a fixed rate mortgage?" I will, however, share some thoughts that I hope will help you clarify whether or not the refinance makes sense.

      • Does your current mortgage come with a prepayment penalty? If so, how much is it and when does the penalty expire? I would not refinance my home, if the cost prepayment penalty wiped out any benefit from the refi.
      • How long do you plan to remain in your home? If you felt it likely that you would move from your home within the next four years, then it makes more sense staying at the lower interest rate of your ARM than refinancing your mortgage.
      • Can you easily afford to make the new mortgage payment in the fixed rate loan? You don't want to put your home in jeopardy by refinancing to a loan with a higher monthly payment that you end up unable to make each and every month.
      • How high can your interest go, according to the terms of the mortgage, and how often are the adjustments scheduled to take place are other factors I would recommend considering.


      If your answers to the questions I posed lead you towards refinancing, then make sure that the 5.2% loan with no out-of-pocket closing costs is the best rate you can get. I suggest speaking with one of Bills.com's mortgage refinancing partners, so you can do some comparison shopping. Interest rates are quite low, as I write this in February, 2011, so if refinancing makes sense, now is a good time to do it.
      0 Votes

    • 35x35
      Mar, 2011
      Daki
      If you have a fixed mortgage for 30 years and at 7.5 % and your property value is worth double less than what you owe, what would make a difference if i refinance to a lower rate or file bankrupt because the payments are getting hard to catch up. thanks
      0 Votes

    • 35x35
      Mar, 2011
      Bill
      I believe what you described is what people in the mortgage business call an "upside-down mortgage" and a "house underwater." Please read the Bills.com resource FHA Short Refinance to learn about your options.
      0 Votes

  • 35x35
    Feb, 2011
    Peter
    I don't understand how refinancing to avoid foreclosure works. When I went to my lender to refinance my home loan, hoping to avoid foreclosure, I was told that my late payments in the past year made me ineligible to refinance my home. I have some equity, but a lot less than I had a few years ago. I also am trying to work with them to do a loan modification, but the process is endless and frustrating. They keep asking me for the same paperwork over and over and not giving me an answer. Now, I hear that if they deny my loan modification, I may have to make up all the difference between my standard mortgage payment and the lower trial payment they gave me in the trial modification. There is no way I could make up six months at $350, if my modification is denied and they demand that I come current or face foreclosure. I am scared and worried and feel that I have no control over what will happen to me and my family. I really appreciate the information you share on your website. If you have any advice for me, I am eager to hear it. Thank you.
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      I beg to differ with the first sentence in your message: Unfortunately, you understand all too well how mortgage refinances work when the market value of the property is less than the balance of the loan, and how poorly mortgage servicers handle mortgage modifications. The problem with your getting a modification is not you; it is the mortgage servicers who are, by outward appearances, understaffed. The sad thing is not only is the mortgage servicers' ineptitude harming people like you, it costs their investors, too. And, it is no fun working for mortgage servicers today, either. Everyone loses.

      I have four suggestions, none brilliant:
      1. Because you are getting nowhere with your servicer using its recommended procedure for getting a mortgage modification, you have nothing to lose by trying NACA's Save the Dream Tour. I am skeptical of NACA's claimed success rate, but if you have the time to attend one of these all-day events you have nothing to lose by getting face-time with a NACA counselor and a mortgage servicer. In American football terms, think of attending a NACA event as your hail-mary pass.
      2. Develop a Plan B for your housing. Look for rentals in your area, and start saving for a lease deposit. This may be terrible to contemplate, but as you mentioned, your housing situation is out of your control right now. Having a Plan B may give you some piece of mind because you control if and when to implement it should Plan A fail.
      3. Regarding the $2,100 lump sum the servicer expects you to cough up should it deny your modification, try to negotiate that item. Perhaps it can be added to your principal.
      4. Because you have some equity in your home, you can sell your home, pay off the lender, and end up with some money in your pocket. That is a far superior solution to letting a foreclosure take place, as the lender may then auction it for a lower price than you could sell it for. This would result in your not receiving as much money compared to your selling the home for as much as you can get. Having even limited equity gives you a lot more flexibility than if you owed more on your mortgage than your home is worth.

      Finally, I realize what I am about to write is no consolation, but you are not alone in your predicament. The burst of the housing bubble coinciding with a recession and spike in unemployment created a housing market unlike any we have seen in generations.

      0 Votes

    • 35x35
      Mar, 2011
      Kelli
      My mortgage company (CHASE Cynthia Lemus 702-558-5446) is doing the same thing. It's been over 18 months. They keep requesting the same paperwork. We went to a seminar 8/2010 where our mortgage company was there to go over our remod and also had a seperate housing counseling agency (NID Corina Isac 702-228-1975 / 510-268-9792) on hand if we had any questions. Their were maybe 7 customers there. I any case they said that their computer files did not show us making any trial payments. Lucky I had ALL our paperwork. They made copies and took our remod paperwork. One month after the seminar they stopped exepting our trial payments. Western Union said reciever had refused payment and gave us a letter. Since then we haven't made any payments. Sent in numerous requested paperwork (Dodd-Frank eligibility Certificate, copy of taxes, tax form 4506T, paystubs, proof of occupancy, etc.) called several times and were basically told either it's in review or we should consider a short sale. None of which they are willing to put in writing. Just keep sending their form letters asking for more paperwork making us chase our own tail. It's all BS. We are ready to walk away. After lighting a match.
      0 Votes

  • 35x35
    Dec, 2010
    Melinda
    We are considering refinancing our home we have a FHA loan interest rate 6.36% 30-year. Credit card debt is about twenty thousand we found an FHA loan with 4.5% interest rate 15-year and enough to pay off the debt closing is about $3,000. Only raising our monthly payments by $200 and taking off 10 years of the original loan. Do you think this is a good deal?
    0 Votes

    • 35x35
      Dec, 2010
      Bill
      If you are confident that you can afford the monthly mortgage payment, then your deal sounds like a good one. A more important question, in my opinion, is whether this deal is the best deal you can find. It is clear that it improves your position compared to your current loan, but have you shopped around to see if you can find anything better? Did you look into non-FHA loans? You did not state your LTV (Loan to value). If a conventional mortgage would not require private mortgage insurance, I suggest you look at that option.
      0 Votes

    • 35x35
      Dec, 2010
      Melinda
      Thanks for such a quick response. Our monthly payments will be cheaper than what we are paying including mortgage and credit card payments. We will save about $400 a month. I was thinking that it may not be worthy to finance twenty thousand for 15 years. No, we have not shopped around only one lender so far. I asked about non-FHA loans the lenders stated our credit score was not high enough for a convention loan scores were 650 & 720. That's what we really wanted a convention loan to eliminate the PMI fees. We currently owe $118,000 our home is worth about $170,000. The new loan amount would be $145,950. Or, would it be better just to refinance the amount we owe $118,000 to get the cheaper interest rate and less years 4.5% interest 15-year.
      0 Votes

    • 35x35
      Dec, 2010
      Bill
      I think that you are wise to consider the costs of including your credit card debt in the home loan. What is your current credit card interest rate? If your 4.5% loan would lower your credit card interest rate significantly, it may be a good choice to include the credit card debt in the loan. Compare savings that come your way from including the credit card debt in the refi to any extra costs you may pay for PMI. It seems from the dollar amounts you listed that you would not have to pay PMI if you borrow $118,000. An FHA loan may be your only option, due to the credit scores you described, but I recommend that you speak with another loan officer to see if you have other options.
      1 Votes

  • 35x35
    Dec, 2010
    Michelle
    My husband I are first time home buyers. We have two loan options to choose from a 7/1 ARM at a 4.75% interest rate or a fixed 5.25% rate loan that has significant closing costs. We don't know how long we plan on living in the home..could be longer than 7 years which loan would you recommend?
    0 Votes

    • 35x35
      Dec, 2010
      Different lenders offer different terms on ARMs, but typically on a 7/1 ARM, the rate is fixed for 7 years after which in year eight the loan becomes an adjustable rate mortgage. The adjustable rate is tied to an index -- the 1-year treasury index is typical -- and is added to a pre-determined margin (usually between 2.25-3.0%) to arrive at the new monthly rate. Look at the terms of the 7/1 ARM offered. What will the margin, life cap, and periodic caps be in the eighth year?

      There is no free lunch. Look at the HUD-1 disclosure to see the true cost of the ARM. Compare these to the up-front closing costs on the fixed-rate loan you were offered.

      If you are young and/or work in profession where you and your spouse expect to move to advance in your careers or otherwise stay employed, then your choice is clear. However, if you love your home, have set deep roots in your community and are surrounded by family, then your chances of living in the property for more than 7 years are high. In that case, nothing beats the security of knowing exactly what your mortgage payment will be next year and the year after that, and so on.
      4 Votes

  • 35x35
    Dec, 2010
    tammy
    Hello, we are current on our mortgage payments but behind on credit cards payments and we would like to refinance our home with a cash out option so we can pay off our credit cards. The problem is, since we are behind on our credit card payments our credit score has lowered to 598 and we can't find anyone who will refinance us even tho' we have the equity in our home to do so. Do you know of a lender who can help us? Thank you.
    0 Votes

    • 35x35
      Dec, 2010
      Since the collapse of the subprime mortgage market, it is very difficult to obtain a cash-out refinance mortgage when you have less than good credit. I have two main suggestions to offer you. The first is for you to take steps to improve your credit score. The second suggestion is to look at FHA loans, which have less strict credit qualifying guidelines than standard loans. If you are not able to use your home equity as a source of a solution for your credit card debt, I recommend that you look at credit counseling and debt settlement as ways to solve your debt problems. If you have high interest rates that are retarding your ability to pay down your debt, look into a credit counseling service. I also recommend that you look at debt settlement as a possible solution, as it can reduce the size of your debt significantly, likely having you debt free in less than three years. Filing for bankruptcy is an option of last resort, but can be the best solution if your debts are large and you meet the rules for qualifying for a bankruptcy.
      1 Votes

    • 35x35
      Dec, 2010
      tammy
      Thank you so much for your help! That isn't what I wanted to hear but I somehow knew it was the answer. I will check into what you have suggested as I think that will be our only route at this time. Again, thank you for your advice and for answering so quickly too!
      2 Votes

  • 35x35
    Dec, 2010
    Joseph
    Thanks for the info. I am planning to refinance my own home and think I will go with a 30 year fixed rate loan, do you think that is wise?
    2 Votes

    • 35x35
      Dec, 2010
      Bill
      A 30 year fixed rate mortgage is a great choice if you plan to live in your home for an extended period, especially with rates near the lowest they have been in our lifetime. Good choice Joe. Be sure to apply with Bills.com and let our lenders compete for your loan!
      7 Votes