seattlemetal
New Poster
Cash: $ 0.45
Posts: 2
Joined: 21 Sep 2005
Location: Kent, WA |
SHould I refinance now? |
|
|
we have two loans on our house....
1st for about 181,000 at 5.75% and the second of about 44,000 at 10.62%. both are 2 yr adjustables and we're 1 year in right now. the first has a prepayment penalty of 4,500 the second does not have a prepayment penalty. we have approximately 30,000 in equity. we are not paying mort ins, and our taxes and H.O. Ins are paid separately...credit scores around 630.
we're considering refinancing now instead of waiting till the 2 year period is up because were nervous about the real estate 'bubble', and rising interest rates.....
we just talked to a guy at country wide who said the first cant really be refinanced due to the prepayment penalty, it makes it not worth it...(for us? or him?)
but he offered us a 'line of credit' that would pay off the second, and about 3500 in debt (which are both at about 20%) and give us 10,000 cash, all at 10% or 500/mo...however the rate is not fixed...its 'tied to prime' and is going to be at 3.5% above prime, it can adjust every 2.5 months and has a cap of 18%! But he said the highest its ever been is 13% in 1984, and that it cant raise more than .25% each time. He said we could refinance again in a year and probably get the first mtg in there too and then get a fixed rate.
I'm confused...and scared shitless that were gonna get scewed....no matter what we do....I see that with the 3500 in debt being rolled into it, we'll be cutting that interest rate in half, which is great, and out second would be at .62% less than it is now, and the payment, at least for right now, would be less than the payments of those same loans now...but...then if it adjusts to something crazy...we're through. and, I'm pretty sure that rates arent going down anytime soon...they just raised them again today as a matter of fact....
can anyone offer any insight or advice to me? SHould we refinance at all right now or wait till the 2 year mark? Should we take the Line Of Credit deal or is that going to put us in a even worse position?
thanks so much!
|
Wed Sep 21, 2005 3:19 am |
|
|
Rolo
Yo' Daddy

Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida |
Those are some pretty high rates. Get your credit score > 685 and you will get better offers. Get 750 or higher and you will get cherry offers.
You are doing the math, so that is good. The prepayment penalty is to prevent you from doing what you are looking to do (get out of the variable loans). Refinancing is nothing more than paying off your current loan (hence the penalty) with monies provided by another loan.
How does a "2-year adjustable" work exactly? At the two year point you get to bend over?
"Expect me when you see me."
|
Thu Sep 22, 2005 2:07 am |
|
|
seattlemetal
New Poster
Cash: $ 0.45
Posts: 2
Joined: 21 Sep 2005
Location: Kent, WA |
haha...yeah pretty much....we've got a year till our turn to bend over...
but I guess if worse comes to worse we could refinance at that 2 year mark...we may have a high payment for a month or two, but after that perhaps our credit scores WILL be alot better....
every inquiry hurts though....thats what I hate....
|
Thu Sep 22, 2005 4:12 am |
|
|
efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA |
Somewhere I read that a credit score of at least 720 gets the best loan deals, or maybe that is the range considered excellent.
Just to give you an idea of what improved credit score can do, my fixed rate loan to refinance my mortgage earlier this year included a HELOC that I can use if I ever need it to borrow against paid principal at a variable rate of prime MINUS 0.5% (4% less than your prime plus 3.5% offer). There is NO prepayment penalty and no annual fee.
So make all your payments on time, and hopefully by the time your current rates bump up, you will qualify for better refi rates. You run the risk that even the best rates will be higher then, but somehow long term rates have stayed low in the face of rising fed rates. Even if they go up, prime minus will still be better than prime plus.
|
Fri Sep 23, 2005 1:23 am |
|
|
Rolo
Yo' Daddy

Cash: $ 309.70
Posts: 1551
Joined: 13 Mar 2005
Location: Colorado/Florida |
quote: Originally posted by seattlemetal every inquiry hurts though....thats what I hate....
Just spread them apart by a few weeks and it won't be detrimental. Multiple inquiries within, I believe, a two-week period is what hurts.
Do you have your credit report? If not, get it and see how you can ensure your score will improve. You are entitled to one free per year as of Jan 1st this year.
"Expect me when you see me."
|
Fri Sep 23, 2005 12:52 pm |
|
|
|