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Does it make sense for me to refinance and/or combine my mortgages?

1,396 Views | 9 Replies | Last: 7 yr ago by Deats99
Ghost91
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Let me start by saying that this stuff is all Greek to me, as is basically anything involving math... But I keep hearing about "refinancing", so wondering if I can benefit.

Here's my situation:
- First mortgage (on home of 11 years): $108K balance and 5.625% interest rate on a conventional 30-year loan (11 years in, 19 years remaining).
- Second mortgage (took out to build pool 7 years ago): $29K balance and 8.24% interest on a 25-year loan.

Talking to loan officer, he initially said that something called a "Hart Program" would probably be the best way to go. But after he looked into things, he said that a "cash out refi" regular refi was better. Here are those terms:
- 15 year loan where I use my current equity to pay off the second mortgage. Term is obviously shorter (15 years versus the 19 that I currently have left) and monthly payment will be about $80 less per month. Overall savings will be $55K+ due to paying it off sooner.
**- However, what I don't understand is that I think he said that my new mortgage balance will be the total of my two current loans ($108K + $29K = $137K plus some fees of approx. $4K for a total of $141K). But if I am using my equity to pay off the smaller, second loan (29K), why would that be added in?

Didn't think of that question until after I had called time out and ended the call so that I could think about it all.

Thanks.
jja79
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AG
It's added in because it still must be paid to the existing lienholder. Equity allows the combination of the existing financing, it doesn't eliminate or lower the balance owed.
Ghost91
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jja79 said:

It's added in because it still must be paid to the existing lienholder. Equity allows the combination of the existing financing, it doesn't eliminate or lower the balance owed.
Thanks, that makes sense.

So, overall - does this sound like a good offer? Is it really as simple as $80 less per month and paid off 5 years sooner for a savings of $50-60K, or am I missing something? The only fees he mentioned was an appraisal ($480).
CS78
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Yes, its a no brainier based off of what you described. Your only question should be who to use to do it and how long to make the new loan for.
jja79
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AG
How long will you be in the house? What rate are you being offered?
Ghost91
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jja79 said:

How long will you be in the house? What rate are you being offered?
No plans to move anytime soon.

Under the 'Harp Program', my options are:

1. 15-year fixed loan at 3.625% (3.8 APR) - would cost $20 more each month, but shave 4 years off of the life of the current loan (saving $38K).

2. 2-year fixed loan at 3.875% (4.02 APR) - would cost $130 less each month, ADD one year to the life of the loan, and save $22K overall.

Apparently I can't bundle my two exiting loans under Harp - the above would only apply to my home loan, and the pool loan would stay as is. Also, the only fee is a $15 credit application fee. ALL closing costs, appraisal etc are contained in the loan amount.

Too good to be true, or should I have done this years ago??

Thanks again.
jja79
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AG
I think you can do better than this. My email is on my profile if you'd like to discuss.
SteveBott
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AG
have you been told your credit scores? those numbers are pretty high compared to market
Jay@AgsReward.com
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Sponsor
AG
Those rates are very high assuming your credit score is over 620.
Deats99
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AG
They are pricing hits for the HARP/MHA program. They finally started baking in the fact that these SISA loans without a true appraisal.
A good plan violently executed now is better than a perfect plan executed next week.
-George S Patton
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