Profile picture for neelyz

High LTV Refi

I bought a short sale in Aug 2012 for $349,000. I put down 10% and have a 4.25% interest rate for 30 years backed by Fannie Mae. Zillow suggests the house is currently worth about $385,000. I owe $313,000. My annual gross income is about $73,000 (verifiable, long-term employment). The only debt I have is the mortgage ($1989/mo) and a car payment ($260/mo). My FICO was around 740 when I obtained the mortgage. The house needs a new roof, furnace, all new windows and some other cosmetic, non-urgent updates. Do I have a snowball's chance in heck of getting a refi with cash-out of about $50,000 without a significant jump in the interest rate? I don't want to go to the mortgage brokers and go through all the paperwork and hoops if I don't have a chance of getting a loan with a decent rate. Any advice would be appreciated.
  • February 24 2013 - Larkfield-Wikiup
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Answers (6)

Hi,

Do not refinance your 1st.  4.25% is a good rate in the current market setting. 

 Moreover, refinancing to take cash out will reset your 30 year timer and unless you plan on selling the home, you've just spent the last 2 years paying interest w/o seeing very little benefit as the closing costs to refinance & the increased Rate of the new loan due to being a "Cash Out" will erase all the savings.

Additionally, most often, Cash Out Refinances hover around the 85% LTV.  There are also additional points associated w/ a Cash Out, which typically take the form of higher rates.

Look to your local Credit Unions and Savings & Loans for a HELOC to suit your refinance needs (in this particular situation).
  • April 09 2014
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  • April 06 2014
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Yes a rate and term refinance would have a much better chance for success. A key factor will be what sort of mortgage insurance your existing loan carries. If you are paying a monthly premium then there is a better chance the numbers work out as compared to if your current loan had the MI built in to the interest rate.
  • February 25 2013
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Profile picture for neelyz
Thank you both for your quick replies. I wouldn't qualify for any government loan rehabilitation programs because I'm not low income (the limit here is about $60,000 for a family of four and we're way over that). I purchased the home for $349,000. The appraisal came in at $360,000. Homes in my neighborhood are selling for $375,000 - $405,000 now. Would a HELOC or home equity loan be any more viable than a refi? As far as I know, they still won't loan more than 80%, right? I just put nearly $10,000 on a credit card (not mine) to fix the plumbing, electrical, and replace the furnace and repair damaged ducts and I still need the roof desperately. Does anyone do second mortgages anymore? One more question and I won't bug you anymore. :-) Would it be worth my time & money to try to refi the existing mortgage to a lower interest rate? I'm at 4.25% now. I know it won't get me the upfront money I need for repairs, but it might save me $100 or so on the monthly payment so that I could afford to replace a window or two at some point...
  • February 25 2013
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Your home would have to appraise much higher than $385,000 to get this done. Zillow is not always accurate, sometimes they can be wildly off base (both to the high and the the low side). Have any similar properties sold in your area within the last 3- 6 months?

However with your credit and income you may be able to get an unsecured loan or line of credit for these things. Depending on who you bank with they might have a great option for you. Credit Unions are good for this too.

Also a roof, furnace, and windows are all things that many utility companies have programs to help replace/upgrade. Maybe check with PG&E or Sonoma County. 

This link is to the PG&E rebates page. This is not going to help with financing and the rebates are not HUGE, but they may still be helpful. 
http://www.pge.com/myhome/saveenergymoney/rebateapplication/

Hope this information helps a little bit.

Sincerely,
Greg

Mortgage Planner - 16 Years Expereince
Partners Mortgage
  • February 25 2013
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No. Cash out refinance to 95% of property value is never going to be an option. I wouldn't put much value in the Zillow estimate considering the deferred maintenance items that you aim to improve.
  • February 24 2013
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