Need advise on refi

[PerryChase]

4 year holding period is not long.

If i were you, I’d sell now. You can probably get out and make some money. If you take history as a guide, the last housing slump was from 1989 to 1996. I think that we are now at the equivalent of 1991. So, 4 years from now, you might end up selling your house at the worse possible time, substantially below 2004 purchase price. This slump may last longer than the last downturn.

Think about the carrying costs you’re paying now. You will not recoup them in appreciation. You might be better off, selling, renting, then moving on whatever destination you’re planning to move to.

[SD Realtor]

Good job on the research SDO… As sdr said get a good faith estimate. As far as rates go the rate you have quoted looks okay. If you want to see the trend then just pull up the 10 year treasury yield to see if it is trending up or down. This will give you an idea of which way rates are trending so perhaps you can get a better rate if they seem to be trending down. Otherwise if they are trending up then lock it in… Once upon a time I was refinancing a property and I had a smoking rate. However the mortgage broker had my loan submitted to a lender that went out of business the week before I was to sign loan docs. They basically got caught in a rate hike. I think it was about 4 years ago that rates really bottomed out in like June but then moved up VERY quickly and by August this lender was done. My loan never got funded and I was screwed. So yeah it pays to make sure your lender is reputable. However that being said I know it is hard for regular guys like us to assess the quality of the lender.

As Perry said you may be better served to sell rather then refi but it all depends on your long term plans.

SD Realtor

[SDowner]

Thank you all for your advice.

Regarding the refi:

Did ask for GFE and going to look into it. We are going thro a broker who was recommended to us by some people who have refinanced with that person. The broker says she will pay the closing costs and therefore there would be no closing costs and that APR and rate would be different because of that. The escrow company will know that the broker is responsible for the closing costs, but not the lender. is this acceptable? We have never done a refi and never dealt with brokers in the past. It sounds too good(fishy) to be true? Both the lender and escrow company is through the mort broker….isnt there a conflict of interest here? can i go with another escrow company to protect my interests in refi?

regarding holding on to the house or sell. i agree i would be better off selling the house. thought about it last year when we could have sold off easily, but as i say things differ in different situations. in our situation, my spouse is earning good income (engineering). i am working towards a professional degree in a totally opposite field (medicine). we cannot spend time, money, energy right now to sell a house, shift households, etc. yes, we made a mistake in 2004, but hindsight is always 20/20. we could have done better research getting into the housing market. we did not. we are young and still have time to learn from our mistakes and not repeat them.

right now, i do not want to make any more mistakes as far as a refi goes. kindly advise.

SDowner

[guitar187]

If that’s the case APR will be higher than the rate. Have her give you an estimated HUD-1 from escrow. The new loan amount should match your payoff + prepaids (interest, impounds, etc.).

[RottedOak]

One positive for your situation is that you bought early in 2004. Based on your escrow date I’m assuming you paid Feb pricing. That was the biggest year for increases, so you would have paid significantly more in Nov/Dec. That explains why your home has appraised for the original purchase amount — you’ve been insulated from the price declines so far because you were just losing the (theoretical) gains made since you bought.

[SDowner]

Hi All,

Thanks for all your advise. Closed the escrow on refi for 30-year 6.125%, no prepayment penalty. We were lucky in that our house appraised with 20% equity right now. As many in this board would say that situation will drastically change in upcoming 5 years. I will not only lose my equity but also high carrying costs due to HOA, high P&I, property tax, etc.

We did calculations based on what it would cost to rent similar housing like ours right now in the same area and compared it to owning our house for the next 5 years. As Perrychase said, we could not get a positive spin on it, even with tax deductions. (this is what will bring down the market as you all predict)

I am not trying to explain or protect my decision here (might sound like it), just saying that we took all the risks into calculation with a worst case scenario (50% loss in the next 5 years) versus renting at the same time. As SDR, Rustico have pointed out repeatedly, our decision to stay put in spite of loss was made upon job situation of both spouses, what we might lose by selling right now compared to selling after 5 years etc.

No one knows what will happen in the next 5 to 10 years. Everything might change financially for us. It might get better or it might get worse. I am hoping for the best, but preparing for the worst.

Once again, this website is awesome. I have learnt a lot from many people here. Thank you all.

SDowner

[SDowner]

Hi All,

Thanks for all your advise. Closed the escrow on refi for 30-year 6.125%, no prepayment penalty. We were lucky in that our house appraised with 20% equity right now. As many in this board would say that situation will drastically change in upcoming 5 years. I will not only lose my equity but also high carrying costs due to HOA, high P&I, property tax, etc.

We did calculations based on what it would cost to rent similar housing like ours right now in the same area and compared it to owning our house for the next 5 years. As Perrychase said, we could not get a positive spin on it, even with tax deductions. (this is what will bring down the market as you all predict)

I am not trying to explain or protect my decision here (might sound like it), just saying that we took all the risks into calculation with a worst case scenario (50% loss in the next 5 years) versus renting at the same time. As SDR, Rustico have pointed out repeatedly, our decision to stay put in spite of loss was made upon job situation of both spouses, what we might lose by selling right now compared to selling after 5 years etc.

No one knows what will happen in the next 5 to 10 years. Everything might change financially for us. It might get better or it might get worse. I am hoping for the best, but preparing for the worst.

Once again, this website is awesome. I have learnt a lot from many people here. Thank you all.

SDowner

[InCarmelValley]

SDowner,

Congrats on your refi. I may have to do the same. Do you mind to share where you get 30-year 6.125% loan. And do you pay points / fees? Thanks.

[InCarmelValley]

SDowner,

Congrats on your refi. I may have to do the same. Do you mind to share where you get 30-year 6.125% loan. And do you pay points / fees? Thanks.

[SDowner]

Hi InCarmelValley,

We got 30_year 6.125% with no points or junk fees. In the whole transaction, we paid about $74 extra in interest because of memorial day weekend and title taking time to close after funds were released. I am fuming a little over that dollar amount, not in money terms, but just in principle.

We got 30-year 6.125% because we have VERY good FICO score, save a lot (have 2 years of mortgage in an emergency fund), live below our means, save 17% of salary in 401(k), can invest rest of money in stocks after refi situation. Our behaviour helped us pay down HELOC in 3 years (original personal plan was to pay down in 5 years), and added 12000 worth of improvements to our modest abode for personal happiness.

We shopped around “A LOT”, got ourself educated, calling different banks, mortgage brokers, contacts thro friends, colleague at work etc. Then, we chose someone based on lots of factors, reliability, rate, our conditions being listened to. (Piggington helped a lot)

What I am trying to say is, InCarmelValley if you know ur strength financially, if you are a good customer for the lender and you know your house will appraise with 20% equity, then no matter who you speak to, you should get the best possible rates with best possible conditions. Do not accept anything less.

Sorry for not giving more info. This is my first experience blogging in any website and I am very wary of giving out any kind of personal information.

SDowner

[SDowner]

Hi InCarmelValley,

We got 30_year 6.125% with no points or junk fees. In the whole transaction, we paid about $74 extra in interest because of memorial day weekend and title taking time to close after funds were released. I am fuming a little over that dollar amount, not in money terms, but just in principle.

We got 30-year 6.125% because we have VERY good FICO score, save a lot (have 2 years of mortgage in an emergency fund), live below our means, save 17% of salary in 401(k), can invest rest of money in stocks after refi situation. Our behaviour helped us pay down HELOC in 3 years (original personal plan was to pay down in 5 years), and added 12000 worth of improvements to our modest abode for personal happiness.

We shopped around “A LOT”, got ourself educated, calling different banks, mortgage brokers, contacts thro friends, colleague at work etc. Then, we chose someone based on lots of factors, reliability, rate, our conditions being listened to. (Piggington helped a lot)

What I am trying to say is, InCarmelValley if you know ur strength financially, if you are a good customer for the lender and you know your house will appraise with 20% equity, then no matter who you speak to, you should get the best possible rates with best possible conditions. Do not accept anything less.

Sorry for not giving more info. This is my first experience blogging in any website and I am very wary of giving out any kind of personal information.

SDowner

[InCarmelValley]

SDowner,

Thanks for the info. I am not interested in any of your personal info. I just like to know which brokeage firm you got the loan.

Regards,

[InCarmelValley]

SDowner,

Thanks for the info. I am not interested in any of your personal info. I just like to know which brokeage firm you got the loan.

Regards,

[Author]

Posts