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Is it best to refinance with your current lender [minimal fees] with .125% higher rate or elsewhere?

I have a 6.25% 10 yr interest only converting to fixed in 8 years at same rate for 30 year total amortization. To refinance elsewhere, closing costs would be anywhere between $7K to $10K including taxes&all prepaid. My lender is offering refinance at .125% higher for only the notary fee being paid. Catch is, I can not roll in $10K I have in improvement credit card taken out with 0% interest for 1 year. I have 11 months remaining on that. I need to lower my payment which a refi will do but I also want to get that $10K taken care of either by selling the home within this next year or rolling it in. I understand I am not acruing any equity with the interest only but I still need to be "divorced" from the house... if you catch my drift!
  • January 29 2009 - Alexandria
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Answers (9)

Lol, you can pour me one and let me drink it!  I need one!

Wow, what an explanation! 

If you are coming into $25k in the next few months, use that to payoff the credit card of $10k.  Refinance your new loan with your current lender, as the fees will be lower.  Boom, problem solved.

  • January 29 2009
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With my calculation of monthly savings is where it gets a bit complicated... bear with me... here ya go!

Currently paying 6.25% Interest only does not allow me to build equity so by refinancing into a 30 year fixed at a lower rate will actually increase my monthly payment by $140 +/-.

However.... after refinancing into a 5.375% 30 year fixed I will be gaining [ optimistically! ] average of $375/month equity or approx $4500/year. After 5 years which SHOULD be enough time for the market to turn around... mind you I say "SHOULD"... I will have over $20K in equity on top of the increase value. In addition, I will have approximately $25K within the next few months to buy down the principal and have it reamortized. The lender already confirmed I can have it reamortized after 90 days from settlement.

The fact of the matter is... I paid $356K in Dec 03. The improvements I've put in were about $50K [a LOT of sweat equity and a relationship! Major mistake... the relationship was with the contractor!! ] . The value here is holding at about $550K or so given the upscale improvements I have made. I owe $330K on the house. There... I've said it all! All aces exposed!

So actually...again optimistically... I'm sitting pretty good. I just HATE the house!! :-)  It's causing me to drink! Can I pour you one and drink it too??!!  :-)
  • January 29 2009
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lol... I thought you meant you were actually getting divorced and had to sell the house. Sorry.

You are quite comical in your posts Jorce. 

How much are you saving a month by refinancing?

  • January 29 2009
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Oh no no no!!! I'm nowhere NEAR foreclosure! I just have a budget I want to stay within! All my payments have been on time, my LTV is approximately 65% and my credit is excellent with a good steady job.

When I say "divorced from this house" I mean that I'm tired of spending money on it. It was built in 1957 and I never meant to actually LIVE in it. Initially, it was to be an investment when I purchased it in Dec 03. Picked the wrong contractor and his incredibly SLOW work caused me to sell my townhouse and move into the house as the bridge loan was coming due. When all was said and done, I paid LESS for this house than I sold the townhouse for it's just that I really really HATE this house! :-) I used to have a bit of disposable income but  now it seems the house can see into my wallet when there's an extra $100 laying around!
  • January 29 2009
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I need a drink.  Got it 'divorced' from the house. Geez louise.

How much are you saving a month by refinancing to the lower rate?

  • January 29 2009
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Jorce,

Am I reading clearly that you are planning to sell in less than a year? 

  • January 29 2009
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Jorce913,

Based on the abbreviated facts that you have disclosed, specifically your time frame of 1 year or less, it is difficult to recommend a refinance for any purpose as your break even on the overall costs could never be recouped. With that being said, if what you really mean to say when you need to be "divorced" from your house is that you will let go in foreclosure/bankruptcy then you need to speak with legal counsel.

Otherwise, contact your local Certified Mortgage Planning Specialist (CMPS) to review your real options.
  • January 29 2009
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Sorry. Meant to include the new rate [2 days ago] would have been 5.375%.

I agree.... not sure HOW to get ahead of this snowball right now. Hoping you can advise me. My gut tells me go with the lender refi rate and low closing but what to do with the credit card balance?
  • January 29 2009
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Jorce,

7-10k in closing costs to refinance and payoff a 10k credit card.  Are you really getting ahead?

When you say your lender is offering a .125% higher, is that on top of the 6.25% or on top of what a new lender is offering?  What is the rate?

  • January 29 2009
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