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Does re-finance make sense in my case?

We have just purchased a condo in Palo Alto, CA 2 months back.It was 510k @ 
80% is the main mortgage at 6.125%
10% was Seller financing at 8% with ballon at end
10% was the down payment.

Does it makes sense to re-finance now or to wait a little longer. 



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January 08 2009 - Palo Alto
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Answers (6)

I forgot to mention that my second 10% (seller financing) is for 5 years with ballon at the end.
Should I be considering merging that 10% into the main loan (assuming I am able to refinance) and pay PMI or just keep the second loan at 8% as it is?
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January 10 2009

.... 4.5% with a non agency seller carry? 
Rolling in cost will get the Loan to values out of whack.
Who paid for the closing cost 60 days ago?

"A couple of people will be really happy" 

How about the current lender that has not received even two payments?  How about the originator that will have the claw back in fees received. 

FYI Property values in CA have generally dropped about 10% since October so finding a willing lender will be very hard. The current subordinated second does not have to replace himself and might just want out of the deal, leaving you to find another willing second, 8% will be sweet compared to what you will be offered.

So many reasons to tell you how fruitless this is. You can make anything make sense on paper, but then reality hits you are dealing with many other agents that have their own interest at heart.

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January 09 2009
Profile picture for CORONA NICK
I doubt you can, but if you can and get a lower rate, go for it...good luck.
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January 09 2009
Mr. Singh:

I would say it makes sense to refinance IF YOU CAN.

Your situation is tricky because:

Many lenders require a history of 12 months payments before refinance.

The other issue is appraisal - will a current appraisal come back in at your purchase price? Since it is in Palo Alto probably so but you can not be sure.

Your 90% LTV can also be an issue - many lenders will only go to 80% on a refinance.

I would get the process started - check with a few lenders - Bank of America has some great rates NOW.

Let me know if you would like some referrals.

Good luck.

Arn
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January 09 2009
Lewis:

Although I appreciate your math, you are leaving out of your posts that many people have depreciation and pre-payment penalties, etc.
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January 09 2009

Based on the information provided, 80% of $510,000 is $408.000. Thus, your second mortgage is $51,000

Let's assume (yeah, I know what happens when you assume, but hear me out) ... Let's assume 4.5% on the interest rate on the new loan, and $3500 in closing costs (that's lender fees, title/attorney fees, and government "hands in your pocket" fees), and you roll the closing costs into the new loan. Your "old" mortgage is down to $406,800 already, so that means your new balance will be $410,300 (+/-).

On a 30 year fixed at 4.5%, you will save $399/mo (+/-) (WOW!), and you will save $136,200 in interest (an even BIGGER WOW!) over the life of the loan.

I don't know the length of term on the 2nd mortgage, but let's say it's amortized over 30 years with a ballon due in 15. (But that doesn't really matter unless it's due in less than 7 years. Read on.) That means you're currently paying $374/mo. If you take the money you save on the new mortgage ($399) and add it to the payments on the 2nd mortgage ($374), you will now be paying $773/mo, and you will pay the loan off in just over 7 years.

I think a couple of people are going to be really, really happy. So, my only question is: What are you waiting for?

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January 09 2009
 
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