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"Brian Huether" <bhuetherNO@comcastSPAM.net> writes:
> My wife and I bought a house in Aug 04. At the time Prime was 4.75%
> and we took a chance on an interest only loan through countrywide
> whose interest rate equals Prime. It is essentially a HELOC and so
> we pay no PMI. The value of the house at the time was around $355K
> and the loan amount was $339K.
So you put about 5% down. Ok. At least it wasn't 100%.
> We knew we planned on being in the house for about 3 years so
> interest only seemed the way to go. At first our monthly payment was
> around $1200. Now it is $2350.
Ow. And now prime's at what 8.25% right?
You aren't alone - lots of folks bit on the utter foolishness of
interest-only variable rate loans, lured by the low initial payments.
I am not sure why folks completely ignored how historically low fixed
rates were at the time and had essentially nowhere to go but upwards
in a time the largest economy in the world was at war. This is why
we're seeing record numbers of foreclosures hitting the market.
> We also pay about $2400/yr in taxes plus $700 for home insurance.
That's at least good news--not horrible taxes and insurance.
> I talked to someone about refinancing and here is what I was
> offered:
>
> A split mortgage where 80% of the loan is fixed at 7.125% (interest
> only)
That's looks like a decent rate on a 30 year fixed, interest-only,
CLTV at 95% right now. The thing I would worry about is whether your
house will appraise today at the same value it had 2 years ago... I am
afraid iit could be lower in wihch you'd fall below 5% equity, and
then you're into still higher rates.
Also, for what it's worth, at least with one lender i have access to,
the interest only is costing ya an additional .5% though.
> and where the remainder is fixed at around 8.125%. It is a zero cost
> loan and the monthly payment would be around $2350 (including taxes
> and insurance).
That looks like a prime minus .25% right now which is also a good
rate. At least the lender doesn't appear to be rapin' ya.
But zero cost loan... heh. Look into that and see how much $ in
closing costs they're rolling into your loan. Just because you do not
bring money to closing doesn't mean it's zero cost. also, look into
the terms of that equity line and see if there's a minimum time it has
to be open in order for it to be 0 cost.
And... better factor the closing costs on the primary mortgage into
your decision as to whether paying that extra $250 a month for a year
is less than the cost of the closing. $3000 ...
> So if I go with this deal then I'm essentially saving around
> $250/month. I was just wondering if anyone thinks I should be able
> to get a better deal. Keep in mind we plan on moving in about a
> year.
Man... that sucks.
From where I sit, the rates look reasonable (though prevailing rates
in your state may be different), but the most compelling portion of
the decision is still unknown --- the closing costs of that primary
mortgage.
I wish I had better news. With the nosedive house values are taking
right now, and with only 5% equity in 04 you may need to brace for
bringing a fair chunk of cash to closing when you move.
--
Todd H.
http://www.toddh.net/
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Re: Refinancing advice needed
