Real Estate and Home Mortgages - Can I just refi my 1st and not my 2nd HELOC?
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courtneyclv
06-05-07, 02:41 AM
One quick question...
My first loan is an ARM and is adjusting..amount $262,000
Second loan is a HELOC in the amount of 25k 11.5%
My LTV may be higher than 90% and if it is, after appraisal, my loan company suggested just refing the first to a 30 year fixed at 6.5%, leave the 2nd. They suggested this because an 80% LTV would get a better rate than if it was 90-95%
If we combine the two loans, the rate would be around 7.375%
What do you think and is this 'allowed'..one company said you cannot do this..you must do either just the HELOC or both, not just the 1st.
Oh..and the 1st loan is with one company, the 2nd is with another.
wbs
courtney
My first loan is an ARM and is adjusting..amount $262,000
Second loan is a HELOC in the amount of 25k 11.5%
My LTV may be higher than 90% and if it is, after appraisal, my loan company suggested just refing the first to a 30 year fixed at 6.5%, leave the 2nd. They suggested this because an 80% LTV would get a better rate than if it was 90-95%
If we combine the two loans, the rate would be around 7.375%
What do you think and is this 'allowed'..one company said you cannot do this..you must do either just the HELOC or both, not just the 1st.
Oh..and the 1st loan is with one company, the 2nd is with another.
wbs
courtney
NTAC
06-13-07, 01:11 PM
The response of "you can't do that"... would just be that company's policy.
It is more complex and will take longer, but you can leave the HELOC in place and just refi the first. Usually the company holding the 2nd is notified by the company underwriting the new 1st mortgage that the refi is taking place. There's a specific name for that type of transaction, but it slips my mind right now. The new company ususally wants to make sure that the company with the 2nd is okay with the new LTVs. It would be a problem if you increased the LTV of the first when the HELOC was underwritten and granted based on a different value.
I recently started this route on my refi and I was told to expect an additional 3~4 weeks processing time. I wound up consolidating the 1st and 2nd into one loan, but I was at 80% and got a really good rate from my bank.
NTAC
It is more complex and will take longer, but you can leave the HELOC in place and just refi the first. Usually the company holding the 2nd is notified by the company underwriting the new 1st mortgage that the refi is taking place. There's a specific name for that type of transaction, but it slips my mind right now. The new company ususally wants to make sure that the company with the 2nd is okay with the new LTVs. It would be a problem if you increased the LTV of the first when the HELOC was underwritten and granted based on a different value.
I recently started this route on my refi and I was told to expect an additional 3~4 weeks processing time. I wound up consolidating the 1st and 2nd into one loan, but I was at 80% and got a really good rate from my bank.
NTAC
Family Guy
06-13-07, 02:43 PM
Good question!
You can refi the first and subordinate the 2nd most of the time. That means the lender providing the HELOC (or other) agrees in writing to stay in the 2nd position on the house. Otherwise, if you just refi the 1st, the HELOC would move up to the 1st position and the new loan (the deed of trust recorded last) would now be in the 2nd position. They won't have that, so the lender of the 2nd needs to agree to stay in the 2nd position.
A few things come into play here.
First, you will need to show your lender (of the new loan) details about your HELOC. NOT just the current balance, they need to know the credit LIMIT. If you owe 0 on it but have a credit line of $20,000 they want to know that and the $20,000 is what they use to determine CLTV (combined loan to value).
E.G. new loan is 100,000 + 20,000 HELOC = 120,000. If value on the house is $150,000 your CLTV is 80%----even if you owe 0 on the HELOC
Next issue: CLTV
If you exceed the CLTV that the lender will go to, take a look at your balance vs. the credit limit. If there is a gap, have the credit limit LOWERED to your balance. This happens all the time, nothing wrong with it.
E.G. new loan is $100,000 & you owe $3000 but a credit limit of $50,000 that upsets your allowed CLTV...have the lender of the HELOC cut your credit limit to $3500 or so and send you documentation of this. Then you're dealing with $100,000 + $3500 to get under your CLTV requirement.
I'm sure lenders contact these people to go back and get the limit raised again later, but that's between the HELOC lender and the borrower--as long as it happens down the road.
The lender with the HELOC may want a copy of the new appraisal, and may also want a copy of your Good Faith Estimate. Why? They want to know if you're getting cash out that can upset THEIR CLTV requirements before they agree to subordinate. If a rate & term refi, I've never had a problem with getting them to subordinate. If a cash out refi, you may have issues.
You can refi the first and subordinate the 2nd most of the time. That means the lender providing the HELOC (or other) agrees in writing to stay in the 2nd position on the house. Otherwise, if you just refi the 1st, the HELOC would move up to the 1st position and the new loan (the deed of trust recorded last) would now be in the 2nd position. They won't have that, so the lender of the 2nd needs to agree to stay in the 2nd position.
A few things come into play here.
First, you will need to show your lender (of the new loan) details about your HELOC. NOT just the current balance, they need to know the credit LIMIT. If you owe 0 on it but have a credit line of $20,000 they want to know that and the $20,000 is what they use to determine CLTV (combined loan to value).
E.G. new loan is 100,000 + 20,000 HELOC = 120,000. If value on the house is $150,000 your CLTV is 80%----even if you owe 0 on the HELOC
Next issue: CLTV
If you exceed the CLTV that the lender will go to, take a look at your balance vs. the credit limit. If there is a gap, have the credit limit LOWERED to your balance. This happens all the time, nothing wrong with it.
E.G. new loan is $100,000 & you owe $3000 but a credit limit of $50,000 that upsets your allowed CLTV...have the lender of the HELOC cut your credit limit to $3500 or so and send you documentation of this. Then you're dealing with $100,000 + $3500 to get under your CLTV requirement.
I'm sure lenders contact these people to go back and get the limit raised again later, but that's between the HELOC lender and the borrower--as long as it happens down the road.
The lender with the HELOC may want a copy of the new appraisal, and may also want a copy of your Good Faith Estimate. Why? They want to know if you're getting cash out that can upset THEIR CLTV requirements before they agree to subordinate. If a rate & term refi, I've never had a problem with getting them to subordinate. If a cash out refi, you may have issues.
courtneyclv
06-15-07, 02:02 PM
I have CountryWide trying to subordinate right now..taking 5-7 businees days..here is my dilema..
If it goes through...
1st is locked at 6.5% (271,000)
2nd is the HELOC at 10.5% (25,000)
Now..I was thinking. Can't I take some of my HELOC and transfer it to my low interest credit card so that it is at 4%? Is that better than just making my payments now and not really ever paying it off? I believe its an I.O payment.
Would that benefit me more than if I did this..(this is another companies option to get two 30 year fixed loans)
1st 6.5 (249,000)
2nd 8.625 (46,000)
So I need to know asap..should I keep a line of credit open if I get approved for the subordination or refinance both loans. If I do transfer the HELOC to my low interest credit card, I am really paying off the amount back to the equity..BUT I will then have a new credit card bill too...HMMM???
If it goes through...
1st is locked at 6.5% (271,000)
2nd is the HELOC at 10.5% (25,000)
Now..I was thinking. Can't I take some of my HELOC and transfer it to my low interest credit card so that it is at 4%? Is that better than just making my payments now and not really ever paying it off? I believe its an I.O payment.
Would that benefit me more than if I did this..(this is another companies option to get two 30 year fixed loans)
1st 6.5 (249,000)
2nd 8.625 (46,000)
So I need to know asap..should I keep a line of credit open if I get approved for the subordination or refinance both loans. If I do transfer the HELOC to my low interest credit card, I am really paying off the amount back to the equity..BUT I will then have a new credit card bill too...HMMM???
courtneyclv
06-15-07, 04:31 PM
Oh..and this is my fiance's house..not mine just yet. So I do have to go alone with what we agree on.
He doesn't want to do a balance transfer of the heloc as of now. If we get the subordination I thought we could do a balance transfer of around 7k to put on a lower interest card, at 4%. The balance of the heloc was 25k. If we do not take the heloc and put it on a lower rate card, then it really wouldn't be beneficial. He knows though that our payment of 10.5% is all interest I believe.
hmm
He doesn't want to do a balance transfer of the heloc as of now. If we get the subordination I thought we could do a balance transfer of around 7k to put on a lower interest card, at 4%. The balance of the heloc was 25k. If we do not take the heloc and put it on a lower rate card, then it really wouldn't be beneficial. He knows though that our payment of 10.5% is all interest I believe.
hmm
courtneyclv
06-16-07, 12:26 AM
Anyone have any ideas? Trying to have my financial planner do all of the numbers to compare
Family Guy
06-18-07, 09:14 AM
I don't use credit cards, but I would never put something like that on there if I did.
Anyway, if you aren't comfortable with combining the loans then just go with the subordination of the HELOC and refi the 1st. Since your current loan is an ARM, you need to get rid of it before it adjusts. Is that about to happen? I forget. Need to get on with this if so, rates have been going up for the last week or so.
If still uncertain about combining the loans, then just do the math. What's the total pay out if you refi only the first and keep the 2nd, compared to the payment if you combine the two? That should tell you where you stand.
IMO, you should be doing this on a 25 year term, not starting over on 30 again, if possible. No more ARM's! LOL
Anyway, if you aren't comfortable with combining the loans then just go with the subordination of the HELOC and refi the 1st. Since your current loan is an ARM, you need to get rid of it before it adjusts. Is that about to happen? I forget. Need to get on with this if so, rates have been going up for the last week or so.
If still uncertain about combining the loans, then just do the math. What's the total pay out if you refi only the first and keep the 2nd, compared to the payment if you combine the two? That should tell you where you stand.
IMO, you should be doing this on a 25 year term, not starting over on 30 again, if possible. No more ARM's! LOL