Financial gurus? The Feds just cut the rates again - do you refinance or wait?

[dvcgirl]

The house value is approx. 580,000. The homes around them are priced for sale in the med 5's and have been on the market for 9 months...
The bad news is not only did the cost of the home drop but they dont even qualify for the mortgage they have now so they cant refin for the same amount because the income is lower and the value is lower..scared1:
sadly the people that will benifit the most from a refin are the ones who will have a tuff time being able to do it

You're right, and just wanted to add that banks have tightened lending standards in general, so some folks who qualified for a loan a few years ago may not qualify for the same loan today based on new tougher lending practices.

Appraisals have gotten a whole lot more realistic too. Back when housing was going through the roof, in magical fashion, appraisals always came in at least at the contract price. We sold our home in NJ back in 2004 before moving to Orlando (now we're back in NJ), just as the real estate market was taking off. Put the house on the market for an insanely high price....double what we paid for the home just four years before....950K. We got immediate offers the first day and had a contract within three days for full-asking price. Well, we had positively no comps to justify our price....but back then it was a "pie in the sky" environment. There were housing in our town going for that much, but not within a distance that we could count them as a comp.

Still, the appraisal came back at 850K...100 grand less than the price. The sellers didn't try to re-negotiate, but their loan wouldn't go through. No problem...they got another appraiser to come out. That appraisal came in low too....870K. Still, loan won't go through, and based on the interest we had in the house, we don't budge on price. Well, another three appraisals later (five total), we got the appraisal we needed, they got the loan, and we sold the house.

 

[flakypuff]

You're right, and just wanted to add that banks have tightened lending standards in general, so some folks who qualified for a loan a few years ago may not qualify for the same loan today based on new tougher lending practices.

Appraisals have gotten a whole lot more realistic too. Back when housing was going through the roof, in magical fashion, appraisals always came in at least at the contract price. We sold our home in NJ back in 2004 before moving to Orlando (now we're back in NJ), just as the real estate market was taking off. Put the house on the market for an insanely high price....double what we paid for the home just four years before....950K. We got immediate offers the first day and had a contract within three days for full-asking price. Well, we had positively no comps to justify our price....but back then it was a "pie in the sky" environment. There were housing in our town going for that much, but not within a distance that we could count them as a comp.

Still, the appraisal came back at 850K...100 grand less than the price. The sellers didn't try to re-negotiate, but their loan wouldn't go through. No problem...they got another appraiser to come out. That appraisal came in low too....870K. Still, loan won't go through, and based on the interest we had in the house, we don't budge on price. Well, another three appraisals later (five total), we got the appraisal we needed, they got the loan, and we sold the house.

Yup..sounds right. the banks are no longer aloud to give you (appraiser) the amount the holder needsso there will be a true value..
A very good friend of our is another appraiser but in commerical..
This guy is self-employed(like my dh). In 1 year he went from making 100,000 year to 27,000. We knew things were tight with him but not just how tight until last week. His wife is a sahm due to a child that has special needs. Aparently, they used the cc to pay for oil, electric..just to live. American Express raised the interest to 30% on his business line of credit because he did not (could not) make full payment then charged him 75.00 late fee..we're talking a cc bill of 20,000..he begged amx to drop the fees as he couldnt pay his bills..nop they wouldnt help. They told him to use one of the checks from his other cc to pay it off He lost his insurance because it was 1700 a month and he wanted to put some food on the table...he applied for help and got turned down because he is a corp he gets benifits... poor poor guy. one year..just one year. His hot water tank broke last week and the oil man said he had to pay for the oil he owed (900)before he would install a new tank..then had to pay for the tank the same day..he had NO money or cc left to pay for one.. The bank will not refin his house because his income has dropped so much he does not qualify..thats when he confided in my dh. I am so worried.. my dh is also self employed
Sorry I got so OT guys..I guess i needed to vent. Thank you

 

[CajunDixie]

We were thinking about doing a re-fi in the spring but may bump tdhat up a bit. The housing market hasn't really hurt us here as we are in an area of second homes. The lakers keep the property values up so we have quite a bit of equity in our house.

Reading flakypuff's post it reminds me of some of the poeple we have come into our office. People that have lost their jobs and refuse to lower themselves by taking a totally different job. Their excuse is they don't want to accept a job they are over qualified for but they will come in and ask the township to pay their utilitiy bills and rent/mortgage. And they'll go to the food pantry for food and household items. Yet the grocery 3 blocks away is hiring. An appraiser, especially one that has no appraisals to do, could easily have gotten another temporary job to pay the bills. I printed out a job list today for a whole range of jobs and it was 18 pages long in a font size of 9 or 10. They guy was making $100,000 a year and maybe the cost of living there is quite a bit higher but it blows my mind when someone that has made that much money has nothing now....seriously where did it all go? Can they sell unneeded stuff on Ebay? If they have multiple autos maybe sell one? Cut internet and cable and extra phone services?

 

[HenDuck]

We have 28 years on a 30 year mortgage at 5.625%.

My broker told me today he can get us a new 30 year mortgage at 4.875% (with points). That reduces our mortgage around $250/month.

But I waiting until he can offerme 4.625% or less. That will be the 1% decrease and $300/month less in payments.

I believe it will come down a bit more, so does my broker.

But if I already had the 4.625% offer, I'd probably go for it.

My philosophy is: if the economy is going to tank, I might as well benefit from it somewhere! We did the same thing during the last housing slump and it was a godsend.

 

[PlutoPony]

One thing to consider when looking to refi is WHO to go with. Was checking rates with b&m banks this morning and ran across an article from yesterday on Wachovia Q4 earnings.... they're down 98% from what analysts predicted, because of write-downs from a mortgage company they bought a couple years ago. In the past, they've been one of the most conservative banks around until they started taking a little more risk to improve earnings, like many banks. OOPS! Not saying Wachovia isn't a stable bank or shouldn't be used now (they didn't lose money, are still paying their dividend, haven't been downgraded as a savings institution, they're just not as good a stock investment as before) -there are many many lending institutions in MUCH worse shape. But we do need to do more research to determine who to take loans from ...... Just something to keep in mind.

 

[T. Lynn]

We refinanced in 2003 and dropped 2 points. We also did it because of the terms.

It was thru our same finance company (Wells Fargo), close at home (mailed paperwork to you and just had it notorized), could only refinance what you currently owed, no closing costs or fees. They were trying to keep their current customers because rates were dropping and people were going elsewhere.

We went from a 30 yr @ 7.5% (with 24 years remaining) to at 15 yr @ 5.625% and then no fees at all. We dropped almost 10 years off our loan from what we had left to what we went to.

It was great and we now have 10 years left. Couldn't beat that deal!!!

 

[MKCP5]

We refinanced in 2003 and dropped 2 points. We also did it because of the terms.

It was thru our same finance company (Wells Fargo), close at home (mailed paperwork to you and just had it notorized), could only refinance what you currently owed, no closing costs or fees. They were trying to keep their current customers because rates were dropping and people were going elsewhere.

We went from a 30 yr @ 7.5% (with 24 years remaining) to at 15 yr @ 5.625% and then no fees at all. We dropped almost 10 years off our loan from what we had left to what we went to.

It was great and we now have 10 years left. Couldn't beat that deal!!!

Wow! That's amazing!! I will kep watching and waiting. Maybe we can change in a few months

 

[MiNNiE2185]

Me and my husband bought a house in april of 2007. The house was 97,900 and our loan amount is 50,000 @ 8.25 for 30 years. We have to pay a penalty if it is paid off in 5 years or less and the interest rate is a fixed rate..Since we bought the house, me and the hub both got better paying jobs, so right now our mortage (with escrow) is under 800.00...would a refi even help?? I am unsure if we should consider a refi...would we have to pay that penalty, or is our loan even enough to be considered for a refi...What should we do?

 

[EthansMom]

It's a little more difficult to decide for us. We are 3.5 years into a 7/1 ARM at 4.5%. So, we still have 3.5 years left at 4.5%. But, if rates drop to 5% with no points, it might make some sense for us to refi, especially as we think we'll be in this house for longer than 3 or 4 years. (At the time we bought the house, 3 years was long term for us. Now, we're looking a bit more down the road.)

 

[leight]

we're in a different situation. We waited to make our first purchase until this year and are starting to look now. Should we wait to get preapproved again until the mortgage rates have been dropped or does that matter? Last year we were approved for $230k and our credit has improved since then and dh is now full time vs part time so our income is up 15k. I am looking at homes in the 220k-250k range but am really looking to get a $230k loan- will keep our payments within $100 of our current rent.

Thanks!

 

[If U Had Wings]

Wow, I really need to start paying more attention to rates. I bought my place back in 2000 before the market started going nutty in my neighborhood. Even now condos the same size as mine in my complex are selling for $90-$100,000 more than what I bought for. Crazy.

I didn't realize the rates are as low as they are. My rate is currently 8.5%. It may be well worth it for me to look into refinancing, especially as my property value have been going up as well. My only problem at this moment would be the cash for closing costs. How much do they normally run?

 

[shelly3girls]

Wow, I really need to start paying more attention to rates. I bought my place back in 2000 before the market started going nutty in my neighborhood. Even now condos the same size as mine in my complex are selling for $90-$100,000 more than what I bought for. Crazy.

I didn't realize the rates are as low as they are. My rate is currently 8.5%. It may be well worth it for me to look into refinancing, especially as my property value have been going up as well. My only problem at this moment would be the cash for closing costs. How much do they normally run?

Given that a new rate could possibly be significantly lower than your current rate (depending on your credit) it may benefit you to refinance and include the costs in the new mortgage. You would be mortgaging a slightly larger amount but if you dropped your rate 2.5% you may still save a large amount.

 

[chris1gill]

we got 6.375 last spring on our 1st home. when can you refi the 1st time? What kind of rates are refi rates? The same as traditional or lower?

I just looked and a 30 year fixed is at 5.5% & the 20 year fixed is at 5.125% at penfed.com which is where we have our mortgage.. we just got the mortgage two months ago & now our closing costs would be the same if we refinanced, and maybe more they told me The problem is, it's not a house we want to keep, but due to the market, we might have to because I'm not selling it for less than 5 when it was worth more than 7 just two years ago. The appraisal two months ago was at 575, so we are more than comfortable with our amount of equity in the home.... but still I'm debating this in my own head, say we don't sell for 3 years or more? obviously refinancing might have been the better option, but say we sell almost immediately which is certainly possible... I just don't know what to do.... But back to your question, I'd refinance from that 6.375 rate right now, today...

 

[suzydisney971]

We have a loan of $217,000 and have 39 years left (took a 40 year for lower payments and we just bought the house in October) and our rate is 6.875%. Our broker is now offering me 5.875% on a 30 year which is good but I'm hoping that it will come down a little bit more. I think I'm going to wait a little while longer. Every month I send in an extra $100 towards the principal so at the end of the year, it will be an additional 1200 off principal so I'll be able to pay it off before the 40 years and I'm also putting extra aside in an envelope in case we have a tough month (I'll be taking maternity leave in August unless something happens and I have take leave sooner and it won't be paid so we'll have the mortgage payment set aside for at least one month

 

[chris1gill]

We have a loan of $217,000 and have 39 years left (took a 40 year for lower payments and we just bought the house in October) and our rate is 6.875%. Our broker is now offering me 5.875% on a 30 year which is good but I'm hoping that it will come down a little bit more. I think I'm going to wait a little while longer. Every month I send in an extra $100 towards the principal so at the end of the year, it will be an additional 1200 off principal so I'll be able to pay it off before the 40 years and I'm also putting extra aside in an envelope in case we have a tough month (I'll be taking maternity leave in August unless something happens and I have take leave sooner and it won't be paid so we'll have the mortgage payment set aside for at least one month

Our lender is Pentagon Federal credit union penfed.com & they are offering 5.5% today, the rate dropped at noontime....

To the person with an 8.5% rate, if you can qualify to refinance, I wouldn't give it a second thought....

 

[disneysteve]

We have a loan of $217,000 and have 39 years left (took a 40 year for lower payments and we just bought the house in October) and our rate is 6.875%. Our broker is now offering me 5.875% on a 30 year which is good but I'm hoping that it will come down a little bit more.

Every month I send in an extra $100 towards the principal

(I'll be taking maternity leave in August unless something happens and I have take leave sooner and it won't be paid so we'll have the mortgage payment set aside for at least one month

I agree on waiting. You should definitely do better than 5.875%, especially in a month or two as rates fall farther.

As for prepaying, that's a whole different debate. I'm generally opposed to it because it generally isn't a good return on your money, though in your case, at 6.875%, it isn't so bad. Even so, if you expect to refinance (as you should) and anticipate a period of unpaid leave in the near future, it might be better to stop the extra payments for now and build up your cash reserve.

 

[Julia M]

A couple of questions....

when estimating a monthly payment, do you use the APR or "rate"?

We currently owe another 9 years (almost exactly 9, we started in Jan) and pay $2333 per month (6.375 rate). AT our current payments for nine more years, we owe about 250K

I am thinking if we can get a refi on the approximately 180K we owe, at about 5% for 10 years, we can lower our payment to about $1700 per month, and even with paying an additional year, we'd save about 40K.

DD is currently in 7th grade. In July 2009, we'll want to pay her high school tuition in a lump sum. THat will add alot to our budget. (We already pay one high school tuition!) Having a lower mortgage would be nice!

Julia

 

[Minnie824]

We've never done a refinance...could someone explain the closing costs? I looked online and we can change from a 30 yr to a 15 yr for only $100 more a month and I want to do this, but the estimated closing costs are over $4000, including a required advance? What the heck is that about? It seems like a lot of fees/costs.

 

[suzydisney971]

I agree on waiting. You should definitely do better than 5.875%, especially in a month or two as rates fall farther.

As for prepaying, that's a whole different debate. I'm generally opposed to it because it generally isn't a good return on your money, though in your case, at 6.875%, it isn't so bad. Even so, if you expect to refinance (as you should) and anticipate a period of unpaid leave in the near future, it might be better to stop the extra payments for now and build up your cash reserve.

I do add to my savings account every pay period (every 2 weeks) so we have money put away for an emergency. It's about 1/3 of my yearly salary so we would be ok for a couple of months especially since I'm also putting money aside for a mortgage payment during the month I'm off. (The baby is supposed to be born August 10th so I'll get paid before I go on leave and the mortgage is due on the first, so I won't worry about August but plan on paying September with the money I'm putting aside now and my DH will continue to work so that will pay for other bills)

 

[disneysteve]

The baby is supposed to be born August

That's great. He/she will share a birthday with none other than ME!