Need financial advice on re-financing mortgage

[Joemonkey]

Moved into this house in July of 2003, got a loan through Chase Manhattan. The house was appraised at $88,000, we got it for $70,000, but due to terms of the loan (they keep money in escrow for insurance and taxes)the actual loan amount was around $76,000. Right now the loan looks like:

$74,657 balance
30 year fixed at 5.5% and don't know the APR (or even what that really is)
$518 monthly payment

Just messing around one day i went to lendingtree.com and put in for a mortgage refinance. I really would like some extra cash right now (our furnace blew up, along with water heater, plus I had surgery, so the bills are stacking up) so I got an offer from 1st securities financial for:

$86,657 loan
30 year fixed at 5.375% APR of 5.7%
$485 monthly payment
$960 closing costs

However, I assume this loan is not going to put taxes and insurance in escrow, so when they are due we'd be hit with a pretty big bill. Also I don't have $960 for the closing costs, can that just be added to the loan?

Man i suck with money, the offer looks really sweet, but I have no idea if it's as sweet as it looks to me since i suck with money.

I also got an offer for:

$86,657
5 year ARM/30 yrs (I'm not sure what the 5 year ARM means)
4.5% interest rate with 4.9% APR
$439 monthly payment
$1,826.57 closing costs :disgust:


Can someone show me the light? And yes I know i could find a lot of this on google, but i can't reply to google and ask more questions

 

[Kelemvor]

Lots of places online will quote you awesome rates but not tell you that they are using points. points work by charging you much more up front in order to save a tiny bit in the percentage rate. With rates as low as they are, using points is completely retarded.

I'm refinancing my house this weekend and what to do depend son a lot of things.

If you are planning on not staying in that house for more than 5 years, you can get a 5 year ARM (Adjustable Rate Mortgage) which basically will get you a really low rate for the first 5 years and then after that it fluctuates with whatever the rates are at the time. (this is what I'm doign because I'll be moving within 5 years).

Either way, the best thing to do is just make an appointment at a local bank or mortgage place (they can do it all over the phone) and go over all the numbers. They can tell you pretty quickly what your payments will be and everything else. It's all just number crunching.

If you have 5.5, that's pretty damn good and i doubt you will find much less unless you go the ARM route. We are getting like 4% with the ARM but it would be more like 5.x with a standard 30 year mortgage.

 

[Joemonkey]

Well the

$86,657 loan
30 year fixed at 5.375% APR of 5.7%
$485 monthly payment
$960 closing costs

offer has 0% points

the

$86,657
5 year ARM/30 yrs (I'm not sure what the 5 year ARM means)
4.5% interest rate with 4.9% APR
$439 monthly payment
$1,826.57 closing costs

has 1% points


We're planning on staying here quite some time, 20+ years

 

[vi edit]

With the rates so low, I'd maybe look at swinging a 15 year, especially if you know you'll be there for a while.

But that's just me.

 

[DBL]

Just apply for a Home equity line of credit. If I read your figures correctly, it appears that you have about 12k - 14k in equity. You should be able to get a line of credit which will give you some cash to use. How much depends on a second appraisal.

I closed today on a line of credit with Chase for prime - 1/4%, which is 3.75% currently. The line of credit is also tax deductible (the interest) and there is no closing costs, which makes it a sweet deal. If you were going to get a significant break on your current 30 fixed, then perhaps it would be worthwhile. But your not, so I don't see a reason to refinance and pay even more money in closing costs.

Good luck

 

[OutHouse]

Treat the refi as buying a car. they work the same way. Get three companies and pit one against the other. If one is charging for something and the other isnt, point it out.

Remember they want to squeeze every last dime out of you. Stay in charge of the whole deal and if something doesnt look right walk away.

 

[Joemonkey]

the reason the refinance looks so good to me is the extra $12,000 would come in very handy. After the bills I have coming in (surgery, furnace, water heater) that total over $5000 it looks really good.

plus I could pay off my or my wife's car, which would save an extra $150 a month, which would in turn allow us to drop insurance ($200/month for full coverage) to liability only, which would save us even more money.

Am I looking at this all wrong? Any advantages to a HELOC vs a refinance?

 

[Ameesh]

you could always look at getting a home equity line to get some extra cash that you need

 

[Joemonkey]

isn't a HELOC the same (effectively) as a second mortgage? Don't I gain anything by simply refinancing?

 

[Vic]

You can't refinance. Any loan app you do will eventually be declined. You've owned the home for less than 12 months.

 

[Joemonkey]

Originally posted by: Vic
You can't refinance. Any loan app you do will eventually be declined. You've owned the home for less than 12 months.

then... why do i have like 4 offers accepted to refinance? i gave the terms in the OP

 

[Ameesh]

Originally posted by: Vic
You can't refinance. Any loan app you do will eventually be declined. You've owned the home for less than 12 months.

i didnt know that, well i have owned my home for less then a year and i was able to get a HELOC so maybe this is your only way to get the extra cash out of your house.

 

[Vic]

To clarify: yes,one could refi in the 1st year, however for value they would have to use either the purchase price or the appraised value used at purchase, whichever is less. Such a condition generally applies to HELOC's (premier ones at least) as well as full-blown refi's. A new appraisal cannot be used in the first 12 months, and a 12 month chain-of-title is a standard Fannie/Freddie condition for refi's.
Also, the maximum Fannie/Freddie cash-out 1st mtg. refi guideline is 90% loan-to-value (LTV). Even if they could use a value of $88k, your max loan amount allowed would be $79.2k -- not much cash out to you there. Max rate-and-term guideline btw is 95% LTV. Either way, expect to pay some hefty PMI.
BTW, you may not realize this, but you're being quoted Fannie/Freddie rates, and every other major investors' rates are higher.

As for why you have 4 quotes, that's easy. You know what the difference is between shopping for a car and shopping for a mortgage? When you're shopping for a car, the "loss leader" has to actually be a real car on their lot.