Real Estate and Home Mortgages - Suggestions for refinancing an 80/20
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vgist
06-19-07, 08:12 PM
Last July, I bought a townhouse with an 80/20 loan, with plans to re-finance as quickly as possible. My first loan, a 5/1 ARM interest-only, is for $224,000 at 7% interest. I would definitely like to get out of the interst-only loan so that I can build equity, and would prefer a fixed rate, but am open to simply changing to another ARM since we will probably move within 5 years, and another ARM may save money.
The second loan is for $56,000 at a fixed rate of 9.025% for 15 years. I want to lower this interest rate.
What suggestions do you have for re-financing both loans with the same company for one monthly payment?
Would you suggest I try to get a fixed rate or another ARM for the first?
The second loan is for $56,000 at a fixed rate of 9.025% for 15 years. I want to lower this interest rate.
What suggestions do you have for re-financing both loans with the same company for one monthly payment?
Would you suggest I try to get a fixed rate or another ARM for the first?
Family Guy
06-20-07, 10:58 AM
I'd definitely get a fixed rate. There just isn't enough difference in rates to go with an ARM. If planning to move in 5 years, 5 years from now you might not be ready to move. Who knows why, things happen. Then you've got a rate that's about to leap upwards or you have to pay to refi again costing you any money you may have saved from the slightly lower rate. Go fixed.
The question is whether or not to combine the two loans. It depends on the numbers and what the current value of your home is. If you combine you'll be taking on PMI, unless your loan would be less than 80% of value of the home. That might not be too bad depending on the value, PMI comes in various rates based largely on LTV (loan to value %).
You'll want to compare doing that to just refinancing the 1st loan and subordinating the 2nd (leaving it as-is). Your loan officer can help you with those figures. When you have the numbers in front of you it will probably be obvious what you want to do.
Let me know if you have more questions.
The question is whether or not to combine the two loans. It depends on the numbers and what the current value of your home is. If you combine you'll be taking on PMI, unless your loan would be less than 80% of value of the home. That might not be too bad depending on the value, PMI comes in various rates based largely on LTV (loan to value %).
You'll want to compare doing that to just refinancing the 1st loan and subordinating the 2nd (leaving it as-is). Your loan officer can help you with those figures. When you have the numbers in front of you it will probably be obvious what you want to do.
Let me know if you have more questions.