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Should I refi?

I am trying to refi. My house has lost about 20K a year in the past 3 years.
We have a primary loan for 225K @ 4.875 and second for 21K@8.0. My house just appraised at 259K.
 I have already locked a rate of 4.0(with 0 closing cost). In order for me to refi the primary loan and keep an 80/20 LTV  I need to pay the primary loan down by 18K and subordinate the second loan.This will save me $230 a month.
Do you think is worth dumping 18K in a declilng house if we are planning on staying here for 8-10 years?
Thanks in advance.
  • October 29 2010 - US
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Answers (7)

Best Answer

I would ask your lender if you can apply your lock (4.0% with no cost is a good deal) to a HARP loan (home affordable refinance program) .  On a HARP loan if you pay off your 2nd you should not have to have pmi even if your loan to value on the first is over 80% (assuming you did not have pmi to start with which I imagine you did not since you utlized a piggy back loan  when you purchased or last refinanced).

  • October 29 2010
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Profile picture for kg1980
Ramona/Bruce,

Thank you all for the helpful insight.
My mothly payment on the second loan is only $162. So if put 18K toward that loan I will continue to have $162 payment for a couple of year until the rest of the loan is paid off.
If I pay down the first loan by 18K and refi @4.0 I save $230 a month immediatly.

Hope this makes sense.
-KG

  • October 30 2010
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KG, I agree with Ramona.  If you have the money to pay off the 2nd it will be a better deal all the way around.  From a Basic Math standpoint, there are very few investments that are going to earn more than 8% (the rate on your 2nd). 
So, if you have 18K - 21K in some investments that are not earning as much as your 2nd is costing you, then it may be worthwhile to use the money to pay off your 2nd, and reinvest the monthly 2nd mortgage payment or even use it to pay off other debt.
  • October 30 2010
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Odds are the 2nd mortgage lien holder will not subordinate the loan knowing that market values continue to decline and your equity position continues to shrink.  Your 1st mortgage rate, historically speaking, is a great rate..I would leave that alone and work to do whatever it takes to payoff/paydown the 8% 2nd mortgage.  Good luck!
  • October 29 2010
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Is the 4% you have locked in for a 15 yr term or 30?
  • October 29 2010
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Profile picture for kg1980
Thanks for the reply . I don't qualify for HARP because I refi last year July 09.
  • October 29 2010
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I replied to your other post.
  • October 29 2010
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