@Anonymous wrote:
Hi all. Here is our situation. We have a mortgage for 230K at a dismal 9.5% monthly pymts are 1950.00 (not including taxes or insurance). DH had to Refi when he got divorced, and his credit was raked through the you know what.....which is why the interest rate is so bad.
Well fast forward to this month, and both of our credit reports are MUCH better my scores are 670-700 and his are around there as well. We have paid the mortgage on time since the begining of the loan. We called yesterday and requested a loan modification to reduce the interest rate. Figuring that the company would want to hang onto a loan that was in good standing, with no lates. Well the company flat out said NO.
So, now we are thinking about doing a full blown refi. The current mortgage has a 2 year pre payment penalty that will expire in November.
Any ideas/suggestions for 1. banks that are pretty good to refi with and 2. what we should do credit wise to make us as attractive as possible to the banks.
Thanks for any and all suggestions!!
~Brooke
What exactly are the terms of your prepayment penalty? That could be the deciding factor as to whether you should refinance now or wait. By my calculations, a $230,000 loan at 9.5% will cost you about $9000 in interest payments by November. If you were to get a new loan at 6.5%, the total interest payments would be about $6200. Your monthly payment would also fall by $500 per month. So if the prepayment penalty is less than $2800, then refinancing now would be a reasonable option. Make sure you factor in all the closing costs and loan fees that go along with any new loan, but those are going to be more or less the same whether you refinance now or in November.
The trend in interest rates is up. With inflation on the rise, banks are going to increase interest rates to protect themselves against the decreasing value of the dollar. 30 year conforming rates have gone from a nationwide average of about 6.1% to 6.3% in recent weeks.
As chartley indicated, getting the most favorable rate without mortgage insurance will require 20% equity in your home. If you have about 15% equity, you might be able to do a combo loan (30 year fixed rate first mortgage and a simultaneous home equity loan). If you have significantly less equity than that, then FHA would probably be your only option.
I recommend that you speak with a mortgage broker or a local bank to see what your options might be. Good luck.
