Should I refinance my house?

Question

I bought my house 3 years ago($280,000. I did no money down and 100% interest because I was trying to keep my payments low so I could pay off a debt. That debt was paid off Yah! but now the market is not helping me. I thought I would have some equity due to hoping the value of my home would slightly increase. I have put $12,000 in improvements into the home. Usually you can only refinance up to 90% of the value of the home. Which would cost me @ $25-$30,000 at closing. My current loan is going to go up by $600 a month. Ouch! I can afford it. It will be tight. Should I just hang in and hope the housing values will increase in the next few years or should I find the money to refinance?

Answer 1

DO NOT REFINANCE!  The amount of fees involved in a refinance is totally not worth it (5-6% in closing costs alone!). Your results are not guaranteed and majority of the time the borrower does not end up very happy with the result of the refi. Keep in mind you also have to have good credit to even be approved for a refinance. You can get the same results, if not better results from having a loan modification done (as long as you have proper legal council representing you, of course.)  From what you stated already, I can tell that you will be able to qualify for one.  They will be able to get you out of that interest only loan and have your payments deduct from the principal this way the loan will actually be getting paid off over time.  I can only speak from my own experience but when my home was in the process of being foreclosed on a few months back I thankfully sought help through the American Modification Agency. They stopped the foreclosure process and saved my home by doing a loan modification (I wouldn't have been able to qualify for a refi even if I wanted to). Now, my family and I are now living comfortably at home and with the peace of mind knowing that there are people out there who can help others, as they did us. They are an attorney driven firm, and practice in all 50 states as well which is cool. Give my advisor a call, his name is Kevin Pugliese [phone] x 2170. He can definitely help you, as he did me. Let me know how everything goes. Wish you the best.

Answer 2

I don't see the problem in refinancing your home. It's fine, so long as your area has long term prospects. I'd recommend you refinance your loan to no more than 80% LVR (loan to value ratio). That way you don't have to pay mortgage insurance, which is extremely expensive.

You could also consider having the house refinanced by a different bank - they could give you a better refinance value, because they don't know how much you bought it for in the first place. Ofcourse, I wouldn't go with another lender if it would incur steep loan break costs.

p.s Home improvements should always focus on either the kitchen or the bathroom - as these give the best rate of return.

Answer 3

Unfortunately, with the decline in values of property your house probably would not appraise for enough to refinance.  If you financed $280,000 and have only been paying interest then you still owe $280,000.  Just because you put $12,000 in improvements doesn't mean it will appraise for $12,000 more than you paid.  Have you noticed if values have fallen where you live?  To get $280,000 on a 90% loan your house would have to appraise for $312,000.  If you have $25,000 - $30,000 laying around then pay down the principal on your current loan.  You can call some lenders and explain the situation but I doubt that you would get the appraisal you would need.  Then you would be out the cost of the appraisal.

Answer 4

Well if you have been paying an interest only loan, my guess is you owe more than the 280K you financed, in any case you bought near the top of the housing bubble and have lost a substantial amount of worth especially in MN. Would get an appraisal before trying to make any decision for the few hundred bucks you will know better where you stand, and then make your decision from there