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Discussion Starter #1
I am totally clueless about home refinance. If anyone could help me figure this out I would be thrilled.<br><br>
Okay, we own an older home that we purchased in October 2003. We paid $57,700 for it. The interest rate is 5.45%. 30 year loan. When we bought the house, we qualified for a closing costs program where if we live in the house for 5 years we would not have to pay back $2500 in closing costs.<br><br>
Fast forward 3 1/2 years....We have done extensive work to our home. We had it appraised for an equity loan 1 1/2 years ago and they appraised it for $85,000. We took out the equity loan for $12,000 to cover some remodeling costs. Now we own $10,000 on the equity loan.<br><br>
I was wondering about the possibility of refinancing the loan to a 15 year loan and combining the equity loan with it. The interest rate on a 15 year loan is 5.75%. We would also take out some extra to do the remaining work on the house.<br><br>
Here are the numbers:<br><br>
Current monthly payment:<br>
$515.00 per month--mortgage (includes taxes, insurance and PMI)<br>
$261.89 per month--equity loan<br>
____________<br>
776.89 per month total payment<br><br>
Refinance payment option:<br><br>
Refinance home to $75,000 ($56,000 for current mortgage payoff, $10,000 for home equity loan payoff, $5,000 for kitchen remodel, $4,000 for fees, etc for refinance)<br><br>
$822.81 total monthly cost of refinance<br><br>
Difference of $45.92<br><br>
Does it make sense to refinance for this? We would be paying more per month than we do now, but would it be worth it for the savings of interest over the 15 years? Just curious if anyone has had this experience and how it works.
 

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Well, If you have the extra to put toward paring down to a 15 year mortgage, why not just give that to your 30 year one and pay it down faster?<br><br>
I think that you would end up with a higher interest rate now anyways...If you have the money to pay the bigger payment, just put it toward what you owe now.<br><br>
HTH
 

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My rough look at that suggests that you should just put extra principal toward paying off the highest interest loans and don't bother with the refi. Save yourself the closing costs.
 

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yea, I wouldn't bother with refinancing I would pay off the equity loan first and then start making extra payments on your first.
 

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oh and one more thing, I'd get that pmi off asap, that will save you money right there that you can put toward your mortgage. IIRC there was a law passed that requires lenders to remove pmi just with an appraisal, in the past some required a refi. Looks like you already have the equity to do that.
 

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Discussion Starter #6
How would you go about having the PMI taken off?<br><br><br><div style="margin:20px;margin-top:5px;">
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<div>Originally Posted by <strong>Arduinna</strong> <a href="/community/forum/post/7952266"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">oh and one more thing, I'd get that pmi off asap, that will save you money right there that you can put toward your mortgage. IIRC there was a law passed that requires lenders to remove pmi just with an appraisal, in the past some required a refi. Looks like you already have the equity to do that.</div>
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Contact whoever has your mortgage and tell them you want to have your pmi removed. They will let you know what the steps are. I am not sure how old your appraisal can be for them to accept it. So you might need another appraisal. if it's still worth at least the 85k from yor last appraisal you shouldn't have any problem getting your pmi off. You just have to have 20% equity.
 

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Discussion Starter #8
Okay, thanks so much. I think you are all right about not refiancing. I was talking to DH tonight and he said the same thing.
 

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<b>Arduinna</b> Thank you for the information about PMI on a mortgage. We're looking at buying a house and the mortgage lady we talked to mentioned PMI. Now I understand why people do the 80/20 loans...<br><br>
Again, thank you.
 

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Private Mortgage Insurance. (And someone else probably knows more on this than I do.) If you have a loan where you put less than 20% down when you buy the home the lender will require it--it doesn't insure you it insures them if you default (sort of like gap insurance on a car but for the lender's benefit).<br><br>
You can sneak around that by financing 20% of the loan through one loan then financing the other 80% through another. You can get it taken off if you owe less than 80% on the loan, but they'll keep it on there if you don't request it. If you don't have 20% of the loan paid down, but the home has increased in value so that you owe 80% or less of it's current value you can get it taken off too.<br><br>
With all these foreclosures lately, I'm curious, if you have PMI and the house goes for auction for less than you owe on it, are you still liable for the difference if you have PMI? Or does the mortgage company get paid by the insurance company and then put a lein on any money they collect from you? Just curious.
 

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<div style="margin:20px;margin-top:5px;">
<div class="smallfont" style="margin-bottom:2px;">Quote:</div>
<table border="0" cellpadding="6" cellspacing="0" width="99%"><tr><td class="alt2" style="border:1px inset;">
<div>Originally Posted by <strong>Gendenwitha</strong> <a href="/community/forum/post/7959740"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a></div>
<div style="font-style:italic;">Private Mortgage Insurance. (And someone else probably knows more on this than I do.) If you have a loan where you put less than 20% down when you buy the home the lender will require it--it doesn't insure you it insures them if you default (sort of like gap insurance on a car but for the lender's benefit).<br><br>
You can sneak around that by financing 20% of the loan through one loan then financing the other 80% through another. You can get it taken off if you owe less than 80% on the loan, but they'll keep it on there if you don't request it. If you don't have 20% of the loan paid down, but the home has increased in value so that you owe 80% or less of it's current value you can get it taken off too.<br><br>
With all these foreclosures lately, I'm curious, if you have PMI and the house goes for auction for less than you owe on it, are you still liable for the difference if you have PMI? Or does the mortgage company get paid by the insurance company and then put a lein on any money they collect from you? Just curious.</div>
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My understanding is that the PMI is what exonerates you from the liability of the difference. That is its very purpose.<br><br>
I've been reading some articles in the WSJ this week about mortgages and the funky financing. I guess it turns out that doing the 80/20 think actually costs you more in the long run (assuming you carry the debt for its term) than PMI and offers no protection to the mortgage company. But the 80/20 financing is a loophole that is used for folks who really can't afford to purchase a home the traditional way, and that's why all of these foreclosures are causing such a stink. People are defaulting on loans, but there is no insurance (PMI) to help keep the mortgage companies afloat because of all of the tricky sub-prime financing. So, in the long-run, PMI is cheaper for the borrower, and safer for the lender. Go figure. <img alt="" class="inlineimg" src="/img/vbsmilies/smilies/rolleyes.gif" style="border:0px solid;" title="rolleyes">
 

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it looks like you got lots of great advice here. i just wanted to mention one more thing that i wish we had thought about. we refinanced a 1 1/2 years ago. we took out 50,000 to pay off debt, do some repairs, and we each needed a new (to us) car.<br><br>
we don't want to live here anymore (bad neighborhood to raise kids) but we are stuck bc of the real estate market. no one would buy our house at the price we would need to sell it at to make enough profit to move onto our next home, if that makes sense.
 

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I think you should focus now on paying as much as you can on the HEL, and definately call and get the PMI off if you can. Then work on the second mortgage. There is no rules that say you cannot pay off your 30 year mort. in 15 years, or even less. Call and ask them how quickly you can pay it off w/o a penalty (some have 3 or 5 year terms, you'd just have to call and see). Each month, take as MUCH as you possibly can and apply it toward the principal of first the HEL, then the mortgage. When you make your payment be sure and tell them to apply the extra toward the principal, and not the next month's payment. Knocking down your principal is what you want to do, b/c you pay interest on the principal. It is very possible to pay your mort. completely off in 10 years, maybe less! Make a goal for when you want the HEL paid off (say 18 months) and then make a goal for the house <img alt="" class="inlineimg" src="http://www.mothering.com/discussions/images/smilies/orngbiggrin.gif" style="border:0px solid;" title="orange big grin"> You can do it! You have a great interest rate right now!
 
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