Re-financing with PMI

username456 · #1 01-15-2008, 10:13 AM

What is the name of your state? CA

Southern California. In an interest-only loan at 5.25% due to reset in Fall 2010. I fortunately can afford payment as well as any worse-case scenario when it resets in Fall 2010. I have great credit. The problem is I'm very stressed and would rather get out of it now. Value problem, falling fast and right now I'm probably at a 95% debt-to-value. My one concern is getting popped with so much PMI with a 95% debt-to-value. Maybe 97% depending on appraisal. Waiting 6 months from now to re-fi to see interest rates drop even further is probably not an option because I'm barely keeping up with dropping value.

My dilemma is should I re-fi even with a ton of PMI ($300/month) or wait it out to see what happens until late 2010?

How easy is it to get out of PMI with lender? Can I pay up-front or do I have to roll into monthly payments?

If appraisal comes in at 97%-100% debt-to-value do I have any options to re-fi? I'm having a hard time getting a good value number looking at cyberhomes, zillow, those are all over the place. Is my only option to pay for an appraisal and hope for the best?

If I do re-fi, do closing cost go back in loan balance to re-adjust debt-to-value percentage?

How long is an appraisal good for?

Thanks!What is the name of your state?

FlyingRon · #2 01-15-2008, 01:01 PM

What are the terms of your loan indexing?

Getting out of PMI depends on the nature of the note (and whether it is backed by things like FHA, etc...). Generally you have to get equity in the property and some even want principal reduction rather than appreciation equity. You never get any principal reduction in an interest only loan obviously.

Generally a years worth of PMI is paid up front and then you escrow monthly for the next years premium.

If you pay the closing costs from the loan proceeds they are part of the debt and will affect the ratio. Obviously if you pay them separately they do not.

What constitutes an acceptable appraisal is at the discretion of the lender.

VeronicaLodge · #3 01-15-2008, 02:26 PM

i dont know about cyberhomes.com but zillow is extremely inaccurate

username456 · #4 01-15-2008, 03:43 PM

current interest only loan will reset at end of 2010 on one-year LIBOR + 2.25%. Then resetting every 12th month after that.

FlyingRon · #5 01-15-2008, 04:32 PM

Well you can send some feelers out to lenders to see what sort of terms they will offer you. You can probably get a good deal of information before they require you to pay for an appraisal or application fee.

LIBOR+2.25 isn't too bad for an ARM (not tremendous, but I suspect you're not qualifying otherwise). You 5.25 doesn't appear to be a teaser (if your rate reset today it would go to 6%). As long as you aren't in one of these goofy negative amortization deals (i.e., you are paying ALL the interest every month), I'd do some shopping.

How long to you envision staying in this property? If you are going to sell in five years or less, I'd be inclined to stick with the existing mortgage. The refi probably would cost more in the long run.

username456 · #6 01-16-2008, 01:58 PM

Thanks FlyingRon. I really appreciate your input.

We would love to sell within 5 years, it will just be an issue of value and when it goes back high enough to NOT take a loss since we bought at peak.

Yes, we pay ALL interest every month. I'm assuming at that first rate change it changes to fully ammoritize over the remaining 25 years based on info in my note saying in Fall 2010, I start to pay principal and interest. The way I'm getting my worst-case payment is using an on-line calculator to look at a 25-yr fully ammortized loan at interest rate cap of 10.25%. Am I on the right track here?

Many people say if we're able to re-fi, it's a no-brainer. But since we have a debt-to-value problem, I'm wondering if PMI is worth it. On the other hand, a Re-fi will definitely alleviate my stress.