Profile picture for xmz19x

80/15/5 Loan Refinance

Hello, I've read similar answers, but not exact matches to my situation.  Here is my situation.  I bought a house in August 2006 for $195,500.  Details:

Down (5%): $9,775

80% mortgage (Freddie Mac - BOFA): 6.5% interest; original amt = $156,400; balance = $146,000

15% mortgage (Citimortgage): 8.675% interest; original amt = $29,325; balance = $25,500

So, I owe a combined $171,500.  The house is in Dearborn, MI 48128.  Values have dropped like a rock and foreclosures are everywhere.  Honestly, I'd like to move and am contemplating buying a new house and renting the Dearborn house.  However, I am paying $1,217/month for both mortgages plus escrow of $325/month.  So, $1,542/month breakeven on the rental.  So, the plan might be to refi and get as low a monthly payment as possible to make renting worthwhile.

Anyway, the question is: can I refinance the first (80%) loan and subordinate the 2nd loan?  Is that my best option?  I have not seen a house near mine sell for anywhere near $195,500, so there's no chance for an appraisal near that price.  Other than that, the house in great condition.  I've updated rooms, painted, added new fixtures--done everything I'm supposed to be doing.

I can put some cash down if I did refi, but cash is king right now and I'm not about to throw more money into this "investment."  Let me also throw this out there: will putting a bit of cash down on the 2nd mortgage help get the subordination?

More details: I have zero debt otherwise.  I have no car payments.  I use one credit card which I pay the balance in full every month and my credit history is spotless.

I've tried to include every bit of info I could into this original post.

Thanks in advance...
  • July 15 2011 - Dearborn
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Answers (12)

Profile picture for xmz19x
Just posting a reply to my own topic as info for others who have a similar situation.  My particular subdivision has very few comparables that are not short sale/foreclosure.  Owners who don't need to sell are not selling.  Therefore, I probably will not get an appraisal that would be worth refinancing.  In the end, I'm not even going to pursue a refinance--it's just not going to happen.  My home was one of the nicer ones in the sub and I'm sure that's hurting me as well.  Luckily, I don't need to refi, I just wanted to save some cash per month.

Thanks for all the replies.
  • July 25 2011
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Profile picture for xmz19x
Thanks T.C.,

I will most likely get in touch with you in the near future.

-Mike
  • July 19 2011
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We do HARP refinances on this situation all the time.   Citibank will VERY likely subordinate.   We often don't need appraisals on our own loans.   If we do, we'll be limited to 125% of the current value on your loan.  It is possible that CITI will still subordinate even if you are 125% on your first.  Feel free to contact me (click on  my profile) and we can pull it up and discuss.   Otherwise, there is a BofA call center at 800 943 2975.   

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does this Freddie Mac refi plus have fees? usually yes. They can be (essentially waived) with a slightly higher interest rate in most cases.  

 Am I looking at, say, 2% of $146,000 in fees?   Probably a little less than two percent including title, appraisal, lender fees.   You'll have to do the math on whether it's better for you to pay the fees or have the bank pay the fees. 

Also, as I've said, I can put cash down to reduce LTV but only if it's worthwhile.  Are the rates consistent with what I'm seeing for new purchase mortgages, i.e. 4.25% 30 year fixed, 3.00% 5/1 ARM?   The rates are slightly better on non-harp refis so it depends on what your house appraises for if you want to approach these rates.   I'd say those are slightly exaggerated numbers or include extra fees.  

Another question: I originally did the 80/15/5 loan to avoid pmi; will I have pmi on a refi since the LTV is no longer 80/20?   No.   Your second will still be in place and there is no pmi on HARP loans. 
  • July 19 2011
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The appraisal issue could be resolved when your loan is submitted to loan prospector for automated underwriting. Ask you loan officer if they will accept a property inspection waiver if LP issues one. The waivers are few and far between, but if your home is way under value this might be an option.

Jeff Thomas
  • July 19 2011
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The requirements state that the first mortgage must be no greater than 125% of the current value of your home. Citibank must agree to subordinate the 2nd mortgage in order for you to refinance. As long as Citi agrees to subordinate, then the rest should be fairly simple.
  • July 18 2011
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When you eventually buy, how long do you see yourself keeping this as a rental? How much do you think you can rent the home out for.  What would you say is your current value. Depending on the appraised value.  I estimate that you would save about $125-$140/month. 


You will get a refund of your current escrow balance from your current lender. If you fund your new escrow account then that will reduce what you roll into your new loan amount.  But if you want to save money towards a downpayment on  your next purchase you can roll closing costs into the new loan.

We lend in MI so you can contact me through my profile if you have any questions
  • July 15 2011
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You are welcome.  Have a wonderful weekend.
  • July 15 2011
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Profile picture for xmz19x
Thanks again Stephanie...
  • July 15 2011
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The rates are a little higher than traditional refinance (of course that is due to the high LTV/CLTV and will be affected by your credit score and the actual appraised value of the home.  Your closing costs will probably be in line with a traditional refinance (2-4%) but will depend on the lender you use.  The cool thing about this program is that, although your property values have declined and your LTV has gone up, there will be no mortgage insurance.   Below is a great link to the program details.
http://www.freddiemac.com/avoidforeclosure/home_affordable_refi.html
You would likely not receive any responses by doing a loan request on Zillow.  You may want to click on the Professionals tab then select Mortgage Lenders and you will be provided with a list of Zillow Lenders.  I would then contact one of those lenders and discuss further.  Good Luck and Have a Wonderful Day.
  • July 15 2011
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Profile picture for xmz19x
Thanks for the responses.  Now, does this Freddie Mac refi plus have fees?  Am I looking at, say, 2% of $146,000 in fees?  Also, as I've said, I can put cash down to reduce LTV but only if it's worthwhile.  Are the rates consistent with what I'm seeing for new purchase mortgages, i.e. 4.25% 30 year fixed, 3.00% 5/1 ARM?

Another question: I originally did the 80/15/5 loan to avoid pmi; will I have pmi on a refi since the LTV is no longer 80/20?
  • July 15 2011
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Good Morning, you indicated that your first mortgage is Freddie Mac owned this means the you could pursure a LP refi plus.  You would indeed need to subordinate your 2nd, and could go up to 125% CLTV (combined loan to value).  So, if you property value declined to even as low as $140,000 you should be okay.
From reading your question, the only issue I see is occupancy status.  If your intent is definitely to purchase a new home then your refinance may be viewed as investment.  If you are simply thinking about it though, it is still your primary residence and should be okay. 

  • July 15 2011
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With a lower value that you think you have, subordinating that second could be an issue.
  • July 15 2011
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