underwater mortgage...everyone's headache

[krystar]

Falling property values suck. suck ass!

i bought my place 3 years ago for 200k. put a nice 20% down on it. well the value dropped...and dropped...and dropped. now according to zillow it's valued at not even 120k. so i'm about 25k underwater. i called the bank and they said they could refinance me for a new 30yr fixed at 4.5% today with 0 cash closing costs by rolling cost into new loan.

how do i evaluate whether or not this is the best option for me? i'm still employed and making enough to pay, but it just doesn't make financial sense to keep on paying a high interest loan.

thanks brain trust

[island911]

gains and losses are not realized until you sell. (or let the bank have it.)

is this a rental?

[RANDY P]

The key is how much your balance will be increased after the refi. If it doesn't increase there is no penalty to you if the rate is reduced.

You need an amortizing calculator or find one online. - Take the new loan amount and the new rate, and continue to pay your OLD payment.

if the loan pays off sooner than it would with what you have now, then you are ahead.

If the loan is truly "free" meaning your principal isn't increased AND the rate is lower it's gonna work in your favor.

[krystar]

the loan officer mumbled to herself that the closing costs was 4k that was going to add into the new loan.

so i'm taking my existing balance (27yr remaining) + 4k to new 30yr term fixed at new rate 4.5%.

now that i type that out, it does't seem to be that good of a deal

[RANDY P]

Originally Posted by krystar

the loan officer mumbled to herself that the closing costs was 4k that was going to add into the new loan.

so i'm taking my existing balance (27yr remaining) + 4k to new 30yr term fixed at new rate 4.5%.

now that i type that out, it does't seem to be that good of a deal

4.5% sucks in this environment. But to be technical remember

1- you will SKIP a payment, so you subtract that from the closing costs

2- Taxes and insurance which they will charge (as part of the closing costs) are offset - you will get a refund from your old lender upon payoff so that needs to be accounted for as well. Look at the back of your existing mortgage statement to see how much that is.

3- remember to make your OLD payment to the new loan.

4-Taxes and insurance are for your benefit, so technically they can't be considered closing cotss..

So, ask the Loan officer how much the NEW loan amount is, SUBTRACT ONE PAYMENT, then take that amount, the new interest rate, and OLD payment and see if it pays off sooner than 27 years.

PS it seems that rate kind of sucks esp. if the closing costs are being charged... But, I'm not watching lately.

[Neilk]

What kind of credit do you have ? 4.5% seems expensive, but I guess it might be related to being underwater.

[RANDY P]

cut and paste what I typed- send it to the Loan Officer and make her meet those terms outlined or quit wasting your time.

She's a knucklehead for trying to sell that loan. It doesn't work.

Well- it only works for someone who is suffering from too high of a payment, but that's not you.

rjp

[stomachmonkey]

3 yr old product?

Your current rate is 6 or less I assume?

FWIW the 4k in closing only really matter if you intend to stay for 30 and pay it off.

Not sure what good a refi is really going to do for you other than lower your monthly by ~$50.

Sounds like what you really wanted from the bank is a new loan on the lower value of the home, borrowing less because the house is worth less. Or put another way, you want the bank to absorb some of the loss in value.

Don't see that happening.

[krystar]

so my existing loan is $950 monthly, paid off is in december 2039.
new loan would be $750monthly + $200 extra, paid off in september 2031.



current loan is 5.75%

i'm calling my existing loan servicer (bank of america) not a seperate bank. i read online that if house is underwater, other banks won't even bother.

my credit is excellent. i dunno what the credit number range is now...but i'm in the upper 80-90 percentile.

[RANDY P]

8 years sooner without increasing your existing payment.

You have your answer. However do shop the rate.

rjp

[biosurfer1]

Dont expect Bank of America to do anything. They lied to my face several times last year and luckily I looked into other options a few weeks ago. Now, I am in the middle of a refinance dropping my 6.5% rate to 4.125%.

HARP 2.0 is coming out in the next couple days, I would strongly suggest finding a couple mortgage brokers and talking with them. The guy I used did all the investigation work for me and didn't require a dime until closing (about $1k less than yours, BTW).

PM me if you'd like his contact info. Straight shooter and nice guy. Not affiliated with him in any way

[island911]

Originally Posted by RANDY P

..
You have your answer. However do shop the rate.

rjp

You mean the APR, right ? ....no buying of points.

[krystar]

biosurfer, if u wouldn't mind, i'd be grateful

[NoLift911]

Sorry - not to be thick here but how are you refinancing a house that is underwater by 25k?

Isn't how this how mess started in the first place ?

[Rick Lee]

Is this through the HARP program? I'd be curious to know if they're going to make you carry PMI, since your loan to value is upside down now, even though it was a respectable 80% at the time you bought.

[krystar]

i'm wondering if HARP is the right path here. it certainly isn't my fault the property values have slumped. this was my first house and i'm still proud to own it. i take care of it. hell, i've been making extra principal payments. so should i blame myself for trying to reduce my APR and my payments?

it's not like i'm trying to screw the bank or the system. i just want to pay less since the current market APR is lower than when i purchased the house.

[biosurfer1]

Originally Posted by P-Dawger

Sorry - not to be thick here but how are you refinancing a house that is underwater by 25k?

Isn't how this how mess started in the first place ?

Refinancing at greater than 100% LTV is part of the HARP program. Its one of the reasons that things arn't much worse than they are already. Not sure how you figure refinancing was the cause of current mess.

If you refinance under HARP, if your current loan doesn't have PMI, you're new loan wont either. If it does, then you will.

[stomachmonkey]

Originally Posted by krystar

i'm wondering if HARP is the right path here. it certainly isn't my fault the property values have slumped. this was my first house and i'm still proud to own it. i take care of it. hell, i've been making extra principal payments. so should i blame myself for trying to reduce my APR and my payments?

it's not like i'm trying to screw the bank or the system. i just want to pay less since the current market APR is lower than when i purchased the house.

Believe your original product had to be Fannie/Freddie backed for HARP. Since it's your 1st house it possibly is.

And there is nothing wrong with trying to lower your APR. Did not mean to imply that there was. I've refi'd myself and may again.

[biosurfer1]

Originally Posted by stomachmonkey

Believe your original product had to be Fannie/Freddie backed for HARP. Since it's your 1st house it possibly is.

And there is nothing wrong with trying to lower your APR. Did not mean to imply that there was. I've refi'd myself and may again.

He's right...and you can check if its owned by either here:

Does Fannie Mae Own Your Mortgage? Loan Lookup Tool

and

https://ww3.freddiemac.com/corporate/

[willtel]

Apparently I don't qualify for HARP 2.0 as my loan isn't owned by Fannie\Freddie. I'm starting to think the only way out of my house is to toss a match and play dumb.