Refi Question

Is this true?? We called our current lender to see if we could refi through them. They told us that because our house isn't worth what we paid for it, we cannot. I told DH that they probably don't want us to refi because we're paying them 6.25%!!!

Here are the details - we bought the house in 2006 for 446,000.

The house is currently worth at least $400,000.

Our mortgage balance is only 325,000 (we put over $100,000 down when we bought)

How would we not be allowed to refi? Even though the house isn't worth 446, we still have $75,000 in equity, right?

Re: Refi Question

In order to a regular re-fi (meaning not a FHA loan) the value of your home has to be at least your current mortgage balance plus 20%. If you went with an FHA re-fi then you need less value. I think it is a minimum of your mortgage balance and 3%. If you go with FHA then you need to pay mortgage insurance.

We just went through this and I was really upset since we put 20% down, but we are saving almost $400K in interest since we went from 30 to 15 year and our old rate was 6.375 and now we are at 3.75.

You need to get a appraised and then you will know. I was shocked how much our value went down even with all the upgrades we did.

Re: Refi Question

80% (loan to value) of 400K is about 320K.

Since it's that close, I would def. call a few brokers and find out if you're able to refi.

Most brokers will want to work with you because they are making money out of you, but your bank will see it as a loss if you pay a lower rate.

Even if the appraisal shows that you're 5k short, you can choose to borrow less (320 instead of 325k) and pay the 5k extra so you can qualify for the 80% loan to value ratio.

Check mortgage rates on zillow.com and you'll find a bunch of well reviewed lenders who can offer you a much better rate. 3.75 is not out of the question.

Good luck!

Re: Refi Question

I dont think your lender explained it correctly- you should be able to refi even if your home is worth less than the price originally paid. I've done several hundred refi closings where the homeowners all bought in 2003-2007 and most of them had *some* equity in the home even if the values dropped significantly. First thing you need to know is if your loan is an FHA Loan, is it Fannie Mae or Freddie Mac, whether you are paying PMI (I dont think so if you put down $ 100K at closing)..

Since the home is worth 400K and your balance is 325K, theres no reason why you can't refi (I cant think of one anyway, unless I am wrong - please correct me if thats the case ). The problem most homeowners have with refinancing is that their mortgages exceeded the 125% LTV..Now that the new HARP program was announced last month eliminating the 125% cap, that will allow many more homeowners to refinance.

If I were you, I would call other Lenders and ask around...

Re: Refi Question

Thank you all for the information.

No, our current loan is not an FHA and no, we were not trying for an FHA refi.

I have the number of a broker and I'll call. Couldn't hurt!