Question by stclaircl: Getting a divorce forces refinancing. Don’t plan to stay in it more than 2 years. What is best mortgage?
If I know I will only be in the house for a short period of time is there some type of mortgage out there that will decrease the payments. My goal is to make some repairs and upgrades and prefer lower payments until the sale is complete. Need to allow 2 to 3 years before sale is complete. Live in S. Texas and housing market is stable.
Answer by Mrs HarleyBrat
best mortgage is fixed conventional with low interst rate and no pre penalty payments – don’t delude yourself though – the market isn’t stable anywhere – good luck
What do you think? Answer below!
I want to learn from this topic.
If you know you will be out in 2 or 3 years an ARM is the way to go. Only if you are sure because the interest rate starts out low and goes up yearly. In under 4 or 5 years you will be ahead in the game, after that it will eat your lunch.
There were also some interest only mortgages, but I’m not sure if they are around any longer.
Get a good mortgage broker, but don’t get one here if they solicit you. You want a great mortgage broker you can look in the eye, and one with good references. Preferably from a good trusted Realtor.
There is no reason to get an arm at this time. Rates are almost identical between ARM’s and fixed plus if for some reason you decide to stay in the house, you don’t have to worry about getting hit with rate increases. I always preach safety when getting a mortgage.
I do a lot of lending in Texas and the market there in many locations is stable. Most of Texas did not get caught up in the crazy housing inflation of many other states.
Here’s what I would look into doing. I’m a big FHA fan because of the low rates and easier underwriting than conventional loans. You can lend up to 97% of the appraised value for a rate/term refi and 95% for a cash out if you need money for the repairs. Also, FHA does not have prepayment penalties.
I would look at either a interest only or arm loan. I know the arm’s are getting a bad rap right now, but they have their purposes. With either product, you would be making interest only payments, you wouldn’t be paying any principle. Here are the drawbacks. One, you’ll have to put enough into the home to make sure you at least break even when you sell it. Two, you better make sure that you’ll be out in 2-3 years, with some loan programs you may get 5, but life changes so if your still there, you’ll have to refi again. Last, I would go through everything with a fine tooth comb, both interest only and arm programs could have prepayment penalities, so be aware of what you are doing. Either program could save you substantial money for completing the upgrades that you want but you need to be careful. If you dont want to deal with the hastle, then go with a 30 fixed, good luck
If you only plan on staying in the house for 2 years, it might not be a good idea to refinance. Because every loan has closing costs you’ll need to back out these costs when deciding if it makes sense to refinance.
For example, let’s say your closing costs come to 3K. But you lower your house payment by $ 50/month. So if you only stay 2 years–24 months, you’ll save a total of 24x$ 50=$ 1200. But it cost you 3K. So the refinacne didn’t save you money…you actually lost money since you paid 3K in closing costs and only saved $ 1200.
So unless you plan to stay in the home I’d think twice about refinancing. However, since you are getting a divorce you’ll want to consult with an attny regarding any equity you have in the home. Texas is a community property state so unless you have something written up, any equity in the home must be split evenly between you and your ex..
I’m a licensed mortgage broker in Austin, Texas and help people all over Texas with their home loans. http://www.mylendingplace.com