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Refinancing Mortgage
Question: Hi, I have an ARM which is just adjusted to 5.75% (and it'll increase to 8.5% next December). I owe $120,000 on this. I have a 2nd mortgage which has an 8.5% interest rate. I owe $23,000 on this. I want to get out of my adjustable rate and into a fixed rate but do not know the best way to do this. My mortgage broker told me to sit tight and advised this is not the time. However, I really feel I need to refinance before December 2008. Also, I paid about $163,000 for my condo 3 1/2 years ago. At that time it was appraised at $173,000, but the mortgage broker believes the appraisal value now may only be $145,000 - $150,000. What should I do? Please HELP. Thank you, Jeanie
Answer: Ignore your mortgage broker. He's probably correct that the value of your condo is down. But you're right to be aggressive about your mortgage situation. The same goes for anyone who's stressed out about their future mortgage payments.
For one thing, the recent cut in interest rates by the Federal Reserve may make it more practical for many homeowners to refinance. The conventional fixed rate mortgage is currently at 5.7%. It's at the lowest rate since the fall of 2005. For another, banks and other financial institutions are under a lot of federal, state, and regulatory pressure to work with financially stressed homeowners. It pays to reach out now when they have every incentive to treat you right (at least compared to the past).
I have a couple of suggestions. Do some of your own research and familiarize yourself with the mortgage market at a couple of online portals, such as www.hsh.com. HSH has a good articles library, and for a fee you can get the loan terms of lenders in your area.
Next, while I'm a big believer in doing research online, it always pays to talk to people in person when it comes to money. If you have a checking or savings account at a brick-and-mortar bank or credit union, introduce yourself to the loan officer. Spend time with her (or him). Let her run some numbers for you. If the numbers don't quite add up, stay in touch and work with her. In other words, develop a professional relationship.
Lastly, there are non-profit institutions in most metropolitan areas that specialize in helping troubled or confused homeowners cope with their mortgage issues. Contact them.
A great mortgage rate site to contact is MortgageMarvel.com. I'm in the mortgage secondary market line of business, and this is what we use to track rates to refi our own homes. We prefer it to Bankrate.com because the latter has a lot of spam rates (teasers designed to suck the reader into a conversation to sell). Mind you, Bankrate has got great calculators and other info, so this negative comment is just about their mortgage rate search engine.
And, as always, check your Credit Union! If you have access to one, they often have the best rates.
You think maybe she might want to wait a few months? If the fed decides to cut rates a little more and potentially home prices are falling to what may look like an attractive price, it's possible she may get a lucky break or two this year. Also, refinancing into a conventional fixed at this point virtually guarantees paying PMI (which is effectively a 5-10% premium on the interest rate). Certainly we will receive plenty of notice from Marketplace if the Fed wants to raise rates before December. You win by paying less than PMI if you wait until summer...
Anyway, I must be really bored, but if you can get 5.25% in 12 weeks, it'd save 15k over the life of the loan. I'm just saying, maybe the mortgage guy isn't off that bad.
