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fha streamline refinance

post #1 of 8
Thread Starter 

DH and I are strongly considering this. It would lower our rate from 5% to 3ish%, and add about 3k to our mortgage total. Our area is not recovering at all. Our comps come in about 65k below what we owe, so really, 3000 is a drop in the bucket, although I don't like getting more underwater at all. My thought is that we could either a. continue paying the same amount we do now and get a bit ahead on the principal, or b. put the extra toward our next step, which is saving for a replacement vehicle, and home repair sinking fund. Our "catch-up" time on it would be 15 months, without extra payments. Since we can't sell it, I feel pretty certain we'll still be here. Although, we desperately want to move from this house, we're aware it will be a while :(

Anyone have experience with this? Any pitfalls? It almost sounds too good to be true.  Thoughts?

post #2 of 8

Friends of ours in MN just managed to refi their underwater mortgage to a lower rate without mortgage insurance, too; and they're done.  When they told me about it, it truly sounded like a miracle.  I don't know that it made their balance any higher, though.  They even had the option of doing a 15 year mortgage instead (because at the lower rates, the payment was almost what they'd have paid on their old 30-year mortgage).  Shocking, but awesome.

 

I would run an amortization table for your current loan and then run one with the new loan amount and interest rate but making the same payment amount you make now and see what the balance is in a year for both of them.  It might be the same--meaning your equity in the house would be the same even having added the $3k.  As long as you KNOW you can be disciplined enough to continue paying the same amount every month... and it sounds like the extra money would be going to non-essentials, so that shouldn't be a problem.

 

If not a year, see just how long it takes for the equity to catch up with that extra $3,000 on the loan (but at a lower rate and paying it down).  You see the greatest impact to principle when you make extra payments early on--so it may be really quick.  If it were me, I would feel okay doing this if the equity were going to even out in about a year (maybe 2, but I'm not sure). 

 

A great mortgage calculator for this stuff is here:

 

http://www.drcalculator.com/mortgage/

 

Click the Monthly Table button to get the amortization table.  Make sure to get the dates put in correctly so you can really see apples to apples.

 

HTH!

post #3 of 8
Thread Starter 

thanks!

I've been looking at amortization tables until my eyes are crossed :)

I think we're leaning toward not, but then the pendulum swings again. I think this can be a great deal for some, but for us, it could be a bit helpful, not great. So, might not be worth the work involved...

Thanks again!

post #4 of 8

This is me too. 5% - 3%, should I or shouldnt I.  I look at refinancing the current amount of mortgage with a, possibly, 20 yr. mortgage (rather then the current 30 yr mortgage)

 

I was wondering, when I read mortgage rates, they say something like 3.2%apr, 20% down  - does this mean I have to put another 20% down on my current mortgage?  Does the house get re-assessed for value?  (Maybe I should look up streamlined :), maybe I should go talk to my bank :))  Or, when one does this, do they just pay the approx 3000 dollar fees to refinance which I then wonder if I should just drop the 3000 on the principal?

 

Calculators show approx 100 - 250 less per month less then what I currently pay. Its tempting.

 

p.s. Ok, Found this which answers most of my questions

http://www.fha.com/fha_streamline_refinance.cfm

except what if I dont have an fha loan, I have a conventional. hmmm

post #5 of 8
Quote:
Originally Posted by SunRise View Post

except what if I dont have an fha loan, I have a conventional. hmmm

 

Double check.  If you have a conventional loan, the bank may be equally willing to do the same thing.

 

20% down usually refers to a new purchase (and unfortunately, if you're paying $100,000 for a house that appraises for $200,000 and only put down $5,000--it doesn't matter that there's WAY more than 20% equity in the house--they want YOU to have PAID 20% of the value... which is a new and ludicrous change to lending  >:(  And you'll wind up paying mortgage insurance  >:(  ).

 

For refi, they generally just want to see 20% equity; but these programs that the OP is talking about are targeted specifically to people who are upside down on their mortgage (and have zero equity at all).

post #6 of 8

Its definitely conventional. Its not upside down, in fact hopefully its its worth more (after bathroom and kitchen reno), which is what makes me a bit hesitant as I dont want it to get appraised and go up.

 

Thanks for the info, it was helpful.

post #7 of 8
Quote:
Originally Posted by SunRise View Post

Its definitely conventional. Its not upside down, in fact hopefully its its worth more (after bathroom and kitchen reno), which is what makes me a bit hesitant as I dont want it to get appraised and go up.

 

Thanks for the info, it was helpful.

 

To be fair, you getting an appraisal as part of refinancing isn't something the town would know.  I mean, how much you finance is public record, but 1) that's not an indication of market value that the town can actually use for assessment purposes; and 2) most towns don't even reference that stuff.

 

Unless you submit it to them for a tax appeal, they won't see that appraisal.  They do their own investigating of value based on closed home sales, market changes and (if they're relatively on top of things) permits issued for home improvements.  So if you pulled permits related to your bath and kitchen reno, they're far more likely to raise based on that.  You should see if your town has a home improvement tax abatement program.  Some towns let you put off the tax increase that goes with improvements for X-number of years.  It's the town's way of encouraging people to improve their properties.

post #8 of 8

:)  Thank you!  Ill look into the home improvement tax abatement program. This town has very high property tax compared to the value of the house (85,000 house / 3500 taxes; I have heard some people do not improve the outside of the homes, in order to not attract attention)

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