I am trying to figure out if I should refinance my home. Please help?
mhunt3 asked:
I am trying to figure out if I should refinance my home. I currently have two mortgages on my home (an 80/20 loan). The 80% has an interest rate of 5.5% that is fixed until June 2010. At that point the interest rate will be variable. The 20% has a varialbe interest rate that is currently at 8.75%. The equity that I have in the home is minimal (assume 5%). There is a 75% chance that I will sell in two years, when the fixed interest rate becomes a variable interest rate. With interest rates so low, should I go ahead and refinance now to a standard 30 year mortgage even though there’s a good chance that I’ll be moving in two years?
CLIFF
I am trying to figure out if I should refinance my home. I currently have two mortgages on my home (an 80/20 loan). The 80% has an interest rate of 5.5% that is fixed until June 2010. At that point the interest rate will be variable. The 20% has a varialbe interest rate that is currently at 8.75%. The equity that I have in the home is minimal (assume 5%). There is a 75% chance that I will sell in two years, when the fixed interest rate becomes a variable interest rate. With interest rates so low, should I go ahead and refinance now to a standard 30 year mortgage even though there’s a good chance that I’ll be moving in two years?
CLIFF
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2 Responses to “I am trying to figure out if I should refinance my home. Please help?”
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NOE
No one can know if there home will sell in two years. It’s a gamble you will have to take. Odds are, you’d go up to 7.5% on your first. Use a mortgage calculator to figure out what your payment would be. Then, assume it would take you a year to sell your house. Would the payment difference be more than closing costs and the extra you’d pay with a new loan? And, you might end up with a prepay penalty in 2010. What does your rate adjust to, and how often can it adjust? You’ll also probably have to pay a prepay penalty now, and I doubt 5% equity will cover that, + closing costs.
You have to consider the risk of not being able to see with how the houseing market is (and no one knows, the feds said we wouldn’t have a slump, and now we do. I’d take what they say with a grain of salt)
And don’t listen to a loan officer, they all still get commission and will tell you its a great idea. Depending on where your payments would go to, I’d stay put.
JESS
You’d likely be shooting yourself in the foot if you refi now. You’ll pay a premium for the high loan to value ratio and maybe some credit based premiums as well. I would suggest staying put for a while and see what developes. And yes, I am a loan officer / mortgage broker!