Consolidating Mortgages

johnvan · #1 10-06-2005, 01:31 PM

What is the name of your state? Maryland

I am trying to refinance my current home, which is my primary residence. My wife and I bought the house last year and in order to buy the house we had to structure the loan with an 80% loan, and the remaining 15% with a home equity loan, and we put 5% down. The equity in our house has gone up tremendously in the past year and we want to consolidate the two loans to a lower interest rate. However, there appears to be an issue with this.

Is it true that if you want to take out a new loan that is more than the original 80% loan I have now, that it is considered a "cash-out" loan, and would therefore fall under different requirements (which could end up costing me more) for the loan? Or, since the home equity loan went to pay for the purchase of the home originally, is it considered "purchase money" in the same way the 80% loan is "purchase money"? If it is, then my appraisal need only give me the 80/20 ratio I need to avoid PMI. If the home equity loan is not considered "purchase money", then is it viewed as taking "cash-out" to pay it off? If that is the case then my loan value can only be 70% of my appraisal value, which may not cover the loan total.

An additional piece of information. I have gotten an appraisal this week, and it looks as if the value will give me what I need (ie loan value = 0.8 * home value), but may not be enough for the 70%.

Clear as mud?

Thanks for any help,
John

pojo2 · #2 10-07-2005, 07:48 AM

Clear enough for you to find a Mortgage professional to assist you in knowing the types fo programs out there for you to take advantage of.

Why if this is your goal are you not out talking to lenders?

Samm1970 · #3 10-07-2005, 10:05 AM

Your new 1st mortgage can be higher than the original first mortgage as long as the additional money is used to pay off the existing 1st mortgage, 2nd mortgage and any costs associated with the refinance. This will still be considered a rate/term since the 2nd mortgage was used to purchase the home. You can get up to 1% of the new mortgage amount back at closing without it being considered a cash-out refinance.

The new mortgage amount would be determined by adding the 1st and 2nd payoffs (which includes interest) and the closing costs and prepaid expenses (costs associated with taxes & insurance) together. If this new amount is over 80% LTV, then you'd be paying mortgage insurance.

To avoid mortgage insurance you could take out another 2nd mortgage to keep your first mortgage under 80% LTV. The new 2nd mortgage would be smaller than the existing one.

Clear as mud?

If not, post back and I'll try to clear it up for you.