How to Refinance a Mortgage Without Going Broke
by Sue in Portland, by a Real Estate Investor, and by Susan in Alexandria
Ask Kate how to refinance a mortgage without going broke: It's ironic that refinancing a home can be expensive when the intent is to make your mortgage more affordable, whether that means a lower house payment or shorter term. Let's meet three homeowners who are looking for answers to questions about the refinance process.
Sue is refinancing their house from a 15 year term to a 30 year. She wants to know my thoughts and if I think her plan is a good idea. Secondly, real estate investors want to refinance their principal residence but are having a difficult time finding a lender interested in helping them, in spite of their strong qualifications. Susan has a balloon payment due soon.
Refinancing from 15 to 30 Year Home Loan By Sue in Portland, Oregon
We are currently refinancing our house from a 15 year to a 30 year, no increase in interests, both 4.75%, closing costs are covered by a 'lender credit' and out of pocket expenses are $258 for the appraisal.
Other then the escrow that is needed, this is the only addition to the loan, which we will pay into the loan when we get the escrow check back from the other mortgage company.
We are doing this for extra liquid cash to pay off other non-tax deductible debt and get us back on track.
Once we pay off the other debt, the extra is going toward the house.
Is this a good idea? What are your thoughts? Thank you
Ask Kate answers: Refinancing from 15 to 30 Year Home Loan
First off, I like that you aren't increasing the balance of your mortgage with excessive closing costs
I'm also glad you have a plan for getting rid of consumer debt.
Thirdly, the most important principle for homeowners is to get an affordable mortgage payment and that is what you are doing.
So even though you are going (seemingly) backward from a 15 year loan to double the term, you still have a viable plan to pay off your mortgage. I applaud you for that.
All homeowners should have an exit plan like yours. By that, I mean paying off the lender, the true mortgage freedom.
Incidentally, did you know I wrote a book on getting out of debt? Sold on Amazon, you can see it at The Mortgage Freedom Project: Kate Ford's Magical 6-Step System to Paying Off Your House Faster and Easier than You Ever Thought Possible
Real Estate Investor Wanting to Refinance Principal Residence By Real Estate Investor
Hi Kate, I have 13 properties, 11 mortgages, in CA, NV, AZ, and ID.
I want to refinance my principal residence in San Jose, CA, but have a hard time finding a lender who wants to deal with me.
I have excellent credit (757), am employed full-time, my husband is employed full-time. All rentals are positive cash flow.
I just want to take advantage of lower interest rates. Current rate on principal residence is 4.375.
How can I find a lender to help me?
Ask Kate answers: Real Estate Investor Wanting to Refinance Principal Residence
Hi Real Estate Investor,
You have a couple of strikes against you, the first one being that lenders have an innate distrust of anyone with more than two mortgages, even more so when they exceed the latest and greatest limit by Fannie Mae.
But because this is your principal residence, there is still hope. What you need is a loan officer who can think outside the box.
However, mortgage originators know the amount of paperwork involved with submitting your package for loan approval is going to be enormous.
So as you search for a lender who is creative enough to sell an underwriter on approving your loan, it will help to have all of your ducks in a row. Here's a checklist of basic information you will need to give your lender
Additionally, make sure prospective lenders know that you have steady income on top of the rental properties' positive cash flow and that you do not have any credit issues.
Put together of package of at least two years of tax returns, all pages, including a schedule E. Include copies of the mortgage statement, signed rental agreements, property tax statement, and liability insurance premium.
I'd create a spreadsheet for each property that includes year bought, current value, address, loan number, lender, mortgage balance, principal and interest payment, amount of rent, property taxes, and homeowners insurance.
A lot of work? Yep. But you are trying to remove the loan originator's objection to taking on your project. This package that you assemble becomes your selling point.
Once you are ready, you can follow these 6 steps for comparing mortgage lenders, originators, and interest rates
. Good luck!
Refinancing 1st and 2nd Mortgages to Avoid Balloon By Susan in Alexandria, Virginia
I purchased my condo in 2004 with an ARM that has adjusted three times downward - currently at 3% and a HELOC with a balloon payment due next year of $25K. I owe approximately $195K on the first mortgage.
I am considering refinancing into one fixed rate for 30 years at 4.5%. The closing cost is approximately $5500 for the loan. I don't know how long I'll be in this condo -- the new rate is approximately the same as what I was paying before the refi with the two loans.
I know I will pay more in interest and with closing costs. Does it make sense to refinance into a fixed loan at this point? Are there other options?
A shorter term loan (15 year) is more than I can comfortably handle. Thanks.
Ask Kate answers: Refinancing 1st and 2nd Mortgages to Avoid Balloon
It's the $25,000 balloon payment that concerns me. How will you address it if you don't refinance?
Get out your final mortgage paperwork to see if there are alternatives to paying the balloon.
Read more about preparing for balloon payments at Caught in a Balloon Payment
by Tina S from Coatesville, PA.
Otherwise, unless you are going to sell the house before the balloon matures or have sufficient savings to pay it in full, refinancing might make sense.
But since you do not know how long you will remain in this house, try to get as close to a no cost refinance as possible. Read more about this option at Mortgage Refinancing at No Cost
for more help.
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