Profile picture for bgami_333

Refi in Baltimore

I bought a 2 unit brownstone in baltimore in 2005 that i have been renting out. i have a 10 year interest only on my first (then it changes to variable) and my 2nd is 9.65% fixed. I am approx 90% LTV based on the purchase price. I want to refi into one fixed payment. Any suggestions? What rate should I be looking for? any comments would be greatly appreciated.

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June 25 2008 - US
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Replies (27)

Talk to a realtor and get a current value on the home.  What you paid for it 2 years ago does nothing for you today.

 

It sounds like it is an investment property, if so I would say that you will be staying with what you have.  No one can give you any real advice without knowing.

 

1. The current Value

2. What you owe on the property

3. What type of credit you have

4 occupancy type

 

those 4 questions need to be answered just to start to offer advice. 

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June 25 2008
Profile picture for PHLoans

Also it is important to know the rate on your current 1st mortgage.  In today's mortgage market a 90% LTV investment property loan is likley to be consderably more expensive than it was 2 years ago.

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June 25 2008
Profile picture for bgami_333

gotcha

1) current value: ??? ... ther is a house across the street half the size selling for 300,000, i know it won't sell for that but its a comparable

2) 216,000 1st mortgage and 26, 000 on second

3) 720 credit score

4) bought as primary but now renting out as investment

 

any further advice?

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June 25 2008
Profile picture for bgami_333

the rate on my 1st is 6.25%

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June 25 2008

Leave it alone

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June 25 2008

I would agree with Martin but would add to make more then just the interest only payment each month. $216,000 @ 6.25% IO gives a payment of $1,125. The same loan with a 30 year fully amortizing payment would be $1330. This will help your options when it is time to make a move. There are MI companies already NOT offering PMI on investment properties. There are no guarantess down the road so start positioning yourself now. Best of Luck.  

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June 25 2008

bg,

Sorry for being so quick.  Chris is much more eloquent in his answer, but rates are not any better today especially for INV loans than what you have on your first mortgage.  Add that the MI portion to obtain an 90% loan if you were to REFI and it would be probably be fairly cost prohibitive with today's interest rates.  I wish you well.

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June 25 2008

I would do a refi only on the first and subordinate the 2nd. There are no lender's that will do a 90% LTV with one loan for an investment property. This is really your only option if you are looking for a fixed rate. Hopefully you claim the rental income on your taxes so you will not have a DTI issue.

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June 25 2008

FHA Mortgage...

 

Are you suggesting to REFI the 1st to a higher rate?  6.25% IO for investment property...Pretty sure that is close to untouchable in the current market!

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June 25 2008

I will disagree with Chris about paying extra on the first.  The first is at 6.25 and the second at 9.65.  You would be wise to pay as aggressively as possible on the SECOND loan since it is a higher interest rate.  Perhaps you can set a target to pay that loan in full in 8 years, to coincide with the expiration of your interest only clause.  I would not pay ONE PENNY of principal to the first mortgage until the second is paid in full.


If you purchased with 10% down 3 years ago, it is not far-fetched to conclude your equity position is likely inferior today to the time of purchase.  Combine this fact with the conversion from occupied to rental and the overall tightening of available credit and it is clear your existing loans are superior to any new loans that would be available.

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June 25 2008

FHA Mortgage - 90% R&T on an Investment CAN be done. They key would be if the current 2nd was taken out at time of purchase. If so it can be done as a 90% R&T Refi no problem. A 300,000 value/ 90% LTV/ $270,000 loan amount/ Full Doc/ 720 Score/ 2unit/ in MD would come in around 7.25%  leaving a payment around $1,842 + PMI. If all you do is take theat same payment and apply it to the loan you currently have you will be better off down the road in my opinion. Hope this helps.

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June 25 2008

Sandiego is correct. Extra money goes to the higher rate. Thanks for catching that.

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June 25 2008

Yes Salem it makes sense to get out of an IO ARM into a P&I Fixed when there is no way to know what the value or rates will be when the loan adjusts. Chances are it wouldn't get approved anyway, but if there was chance, better do it now than later. It's not always about lowering the rate or the payment, in this case it is getting someone out of a bad situation. No loan modifications or rate freezes for investment properties. Keep that in mind too.

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June 25 2008

10/1 ARM opened in 2005.

 

6.25% fixed for the next 7 Years what possible benefit can you sell for taking a rate a point or more higher and closing costs?

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June 25 2008

Being a licensed originator in MD I wouldn't touch that loan with a 10 foot pole...even though it is technically a tangible benefit to go from a I/O ARM to a fixed rate. That rate is fixed thru 2015, and you are going to increase their payment...has too many hints of predatory lending taste's for my mouth

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June 25 2008

How about the benefit of paying the balance down and gaining some equity as opposed to being upside down when the values go down another 20% to 30% over the next 3 years? Besides, investment properties can get fixed at 6.75%. Most loans that are switched from IO to P&I will have a higher payment. It's not always about the payment. People are not going to be selling their home when they are over equity. By not doing something now, it could end up costing more in the long run. What happens when the rates are back up to 8% like they were before the "boom"? If something gets done now, in 7 years the mortgage would be paid down considerably, putting the homeowner in a much better situation, even if the payment is higher. Don't tell me you were selling the Pay Option Arm's. Your mentality of having the lowest payment possible is not always the wisest decision.  

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June 25 2008
Profile picture for Ken Kopper

Instead of higher rate and incurring closing costs, why not advise the borrower that they can simply make principal payments at their convenience instead of being locked in at a higher rate and higher payment and adding closing costs to the mix.

 

bgami, unless you are looking to take substantial cash out...Let it ride for the next 8 years.

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June 25 2008

FHA, can you explain how the balance will be less 5 years from now in a refinance than it would be by keeping the current loans? 

 

Don't forget to add about 6-7,000 to the current balance for closing costs including the 1.5% for MIP in your FHA scenario.  Maybe much higher costs actually if you will get a 6.75% rate for NOO.

 

Also, don't forget to compare apples to apples and compare making the projected payment on the new loan vs the SAME projected payment on the current loans.

 

One side not about the existing loan, it would not surprise me if the first is actually a 30 fixed rate, IO for 10, and not a 10/1 IO ARM.  In 2005 the 30IO priced almost exactly the same as 30 fixed amortized.  I have had countless customers who were put into a 30 IO fixed (great program) and just assumed the rate adjusted after 10 years because the payment adjusts after 10 years.

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June 25 2008

Option ARM's weren't my cup of tea...but as others have mentioned instead of taking the higher rate, there would be more benefit to the customer to just apply that extra money the higher rate would require to the principal. 2015 is a long way away, and I don't like to sell fear but, that's just me

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June 25 2008
Profile picture for Ken Kopper

Instead of trying to sell a loan that makes no sense to anyone but your pocket, why not reassure the borrower that they are in the best present position and hope that you have earned their respect enough for future investment purchases and referrals.

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June 25 2008
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[content removed by moderator for being self promotional]

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July 11 2008

inv_mortgage, you just became approved today and have made 4 total posts on the boards, all of which have been spam.  You aren't associated with anyone named "Pyle" are you?

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July 11 2008

He/She is not approved, just a regular old profile.

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July 11 2008
Profile picture for Ken Kopper

Very perceptive CL..Maybe we Zillow lenders should band together and call their office all day and solicit toner deals...

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July 11 2008

Ah, that's right.  Just created profile today and spamming away!

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July 11 2008

I think we should all call for more info on their No Doc loans they still have available according to their website KK

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July 11 2008
Profile picture for Ken Kopper

There are a few lenders out there that still have them...

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July 11 2008
 
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