Refinancing an 80/20 Loan in to 1 new loan.

Hello, Our house in Michigan is worth $158,000. We have two loans, first balance $131,700 at 5.25% and a second home equity loan $24,800 at 8%. We bought the house with little down back in 2006 with the 80/20 loan. We have since refinanced both loans: The second went from a line of credit to a home equity loan, the first was refinanced under the harp program in 2011. With interests rates being so low we would like to get a new loan for both. We have cash to pay down either loan so that we are at a 95% LTV ratio. Even with paying PMI we would save about $400 a month on a new loan at the current rates. Is this a possibility with a conventional refinance? Is there lenders that will do this at 5% equity?   
  • December 10 2012 - US
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Answers (4)

Best Answer

As far as my bank's guidelines are concerned at least, the day you refinanced the second mortgage it killed this plan (as you have laid it out).    It would now be considered "cashout" to pay it off using conventional financing and limited to 80% LTV. 

FHA has less restrictive rules for this, so it should work through FHA.  But FHA PMI is typically more expensive(but then again often better rates with FHA).

Without doing the math, $400 seems overly optimistic on a $160,000, $130,000 that you refinanced within the last couple years, when you factor for PMI, but then again I don't know what rates you're working with.

Feel free to click on me and get in touch if you'd like to go over options in detail.



  • December 13 2012
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I guess I don't understand why it is considered cash out? I refinanced the loan that was used to purchase the property, I added no more cash to the deal on the refinance. I am really regretting getting this 80/20 loan that avoided PMI because it seems everytime I try to refinance to get a much better payment something blocks me. The bank that owns the home equity loan won't work with me either.
I don't want to just refinance the 1st and subordinate the 2nd again, I want to get rid of the 2nd. I will consider FHA but with the fees to get it started I am not sure it will work. They PMI on a 95% con is about $80, what is it on the FHA?
Thanks for all your help. I am in talks with CBC national bank right now and they seem to think they can make it work, if it doesnt I will contact one of you.
  • December 16 2012
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This sounds doable to me. There are some PMI companies out there that will go to 95%. It all depends on what your credit is and if you qualify income wise. Let me know if you have any other questions. Thanks!
  • December 12 2012
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Additionally the original 80/20 loan was used to purchase the property without PMI.

  • December 10 2012
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