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Principal Reduction before refinance

We are trying to refinance our upside down loan, the loan amount is 654k, our house value now is 520k, should I pay the difference of amount to my current lender and then shop to refinance, or should I shop for refinancing and apply this amount at closing? What is best way to do, please advice.
  • April 15 2013 - Rancho Mirage
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Answers (7)

Best Answer

It would be very risky to pay it down before closing your new loan. If you pay it down and then can't refinance you will (probably) not be able to get the money back. Always wait for closing before putting the funds toward paying down the balance.
  • April 15 2013
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Preddy,

Do you have a reason to? It sounds like you will be closing very soon if the appraisal is back and your rate is locked. 

I would bring the funds to escrow and have them disperse it to your current lender with the payoff funds at closing.

Greg

P.S. Make sure you make your June payment before there are any late fees if you haven't already. Most lenders will need to receive the payoff funds by the 15th in order for them to not add a late fee to the payoff amount. 
  • June 05 2013
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The appraisal is back and we have the figure how much amount is need to buy down, and the interest rate is locked for us, Can I pay some amount before closing to the existing loan provider
  • June 05 2013
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I agree with Russell, but I will add one thing... If you pay it down at closing, your lender will want to "source" the funds. If the funds have been in your checking/savings/investment accounts for 2+ months, then there should be no problem. If the funds are coming another source (i.e. another loan, a gift, or other source outside of your own funds), you will need to be prepared to have the underwriter request documentation and it must be an acceptable source.
  • April 15 2013
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You're very welcome!

  • April 15 2013
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Thank you for the prompt and best advice..
  • April 15 2013
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I personally would shop and then buy down your loan amount at closing. How much you need to buy it down will depend on the appraised value. You will not know that until you start the loan process. If you do it before, you may spend more buying it down than was needed.
Feel free to contact me on my profile to discuss your options.
All The Best!
  • April 15 2013
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