Help; paid off mortgage & borrow again

[creditfan]

I have 30 fixed 4.5% mortgage w/ 3% down, have been paying for 2 years

now I want to borrow my relative money to pay off my mortage to get rid of escow acct and PMI, and then loan against my property again to pay back my relative I owed. Aslo since interest is also on going down now to take advantage of

My question is, should I do the refianance 30y fixed again or HELOC? which one is better because I want to take out arount 90% to 95% equity to pay it back

Thank you for suggestion

[ShanetheMortgageMan]

Doing a cash out refinance on a traditional 1st mortgage typically only goes to 80% of your home's value (VA mortgages will go to 100% if you are eligible), but home equity loans (HEL)/lines of credit (HELOC) will commonly go to 90-95% of your home's value. 

A traditional 1st mortgage will almost always have lower rates than a HEL/HELOC, as a HEL/HELOC is commonly a 2nd mortgage program which is riskier for lenders to do (since in the event of a foreclosure, 2nd mortgages have less of a chance of getting paid in full).

Why do you want to borrow money from a relative to pay off your mortgage and then take out a mortgage to pay back your relative?  Why don't you just get a new mortgage to pay off your existing mortgage, without involving your relative at all?

If your goal is to eliminate the escrow account and PMI, then https://www.fanniemae.com/content/guide/servicing/b/8.1/04.html details the ways you can remove PMI without refinancing.  You might be able to remove the escrow account if you pay your lender a fee, as usually you get a little better rates with an escrow account vs. without an escrow account.

The other way to accomplish eliminating the escrow account and PMI is to refinance your existing mortgage into a 1st mortgage at no more than 80% of your home's current value and financing the remainder on a HEL/HELOC 2nd mortgage.

[creditfan]

currently estimated my house is worth $150,000, and my mortgage is still $135,000. I believe I have 10% equity, and I also currently carry credit balance around $10,000.

I have been reading and try improve my knowledge about how to saving on interest and payoff fast.  So to the simple way of my understanding so far is to borrow money to pay it off then refinance out again with 100% value of house as a 1st lien to credit union to get better interest rate, and get rid of PMI (no1 priority)

As you suggested outright refinance with bank without borrow from my relative, I believe it will be difficult to get approved from bank or credit union because I current unemployed and balance owe on credit cards

Do you think it's still doable with my situation?

thank you

[kc0039]

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@creditfan wrote:

currently estimated my house is worth $150,000, and my mortgage is still $135,000. I believe I have 10% equity, and I also currently carry credit balance around $10,000.

I have been reading and try improve my knowledge about how to saving on interest and payoff fast.  So to the simple way of my understanding so far is to borrow money to pay it off then refinance out again with 100% value of house as a 1st lien to credit union to get better interest rate, and get rid of PMI (no1 priority)

As you suggested outright refinance with bank without borrow from my relative, I believe it will be difficult to get approved from bank or credit union because I current unemployed and balance owe on credit cards

Do you think it's still doable with my situation?

thank you

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This won't be doable since most, if not all lenders will look over your ability to repay the loan. How can you repay the loan if you are currently unemployed? Unless you tons of assets that we can use as "income", then this won't be doable. 

[JVille]

“I believe it will be difficult to get approved from bank or credit union because I current unemployed and balance owe on credit cards”
Base on your own words I would say approval is unlikely.

[CreditInspired]

OP

There are too many variables and as others have said, no lender will loan you money with no income. Also lenders want 2 years of steady employment—no gaps.

The other thing is it’s never good to estimate the value of your home. You need a Realtor to do a CMA to get an idea of it’s value or a bank appraisal.

It sounds as if your loan may be an FHA. If yes, once you’re re-employed, look into FHA streamline.

[ShanetheMortgageMan]

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@creditfan wrote:

currently estimated my house is worth $150,000, and my mortgage is still $135,000. I believe I have 10% equity, and I also currently carry credit balance around $10,000.

I have been reading and try improve my knowledge about how to saving on interest and payoff fast.  So to the simple way of my understanding so far is to borrow money to pay it off then refinance out again with 100% value of house as a 1st lien to credit union to get better interest rate, and get rid of PMI (no1 priority)

As you suggested outright refinance with bank without borrow from my relative, I believe it will be difficult to get approved from bank or credit union because I current unemployed and balance owe on credit cards

Do you think it's still doable with my situation?

thank you

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As others have pointed out, without income/employment your options will be slim to none.  First step is to be gainfully employed full time.  Depending on how long you've been out of work you may need to be back on the job for anywhere from 1 to 6 months before lenders would consider providing you financing.

In the meantime, then if your family member is still willing to lend you money, would it be at a lower interest rate than you are currently paying?  If so, then you are correct that it'll eliminate any PMI as well as you'd no longer have an escrow account, lowering the monthly payment you'd need to make.  Keep in mind you'd then be responsible for paying property taxes & homeowner's insurance on your own.

If the loan from your family member is unsecured, then when you go to do financing on your home again it'd be considered a cash out refinance and you'd normally be limited to about 80% of your home's value.  However, if your family member records the loan as a trust deed against your home then that is a mortgage, and so then when you go to refinance and pay off your relative it won't be considered a cash out refinance as long as you are financing/paying off what is owed + the new loan's closing costs.  A title company can assist your family member with creating the trust deed that'd be filed against your home.

[creditfan]

let's be more specific about my situation

I'm just be out of work about 2 months now, and currently looking for new one

the money I lend from family member is unsecure. They trusted me, we are a honesty family and trusted each others

the purpose I am doing this was trying to eliminate PMI and escow and see which route should I go to make saving on interest, in this case is refinance or heloc, and then give it back to my family member to amount of whatever I borrowed.

I think  I will do cash out refinance as sugguested, thanks

thank you guys for all your concerns and helpful advise