by mary hodder
Question by jonathanzila: How do I know when it is time to refinance my 2 mortgages into 1?
I bought my house a year ago, and put 3% down. We took out an 80% first mortgage and 20% second mortgage. Our second mortgage is adjusting and keeps going up every month. I do not want to pay Private Mortgage Insurance, but also do not want to keep seeing my payment go up. How do I find out if I have 20% equity in the house? Should I refinance it?
Answer by gottanew1
The equity is determined by the increased value of your prop and in a year that may not be much.
Sounds like you’re just gonna hafta grin and bear it for awhile unless you can come up with differant money to cover the 2nd.
Be honest with your numbers-closing cost / commissions / etc are all part of the cost of ownership so be sure to factor in all you can when trying to determine equity.
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Unless you live an an area of extremely high property appreciation I doubt you have sufficient equity accrued at this point to add up to the 20-25% necessary to waive a PMI requirement.
There is, however, an option. You could refinance the 2 loans into one loan (probably an FHA). You would have an FHA mortgage insurance premium financed as a part of the loan (increased interest write off) and renewals but they would be substantially smaller than conventional PMI and the rate would be fixed.
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Refinanicing would be good, because that 2nd is going to keep adjusting up. You would need an appraisal to see if you had any equity. I can Help! Shoot me an email to firstname.lastname@example.org, and let’s chat!
I am a loan officer and as much as I would like to close a loan, it would not be good for you to do so now.
If you can knuckle under until your home appreciates where you can get an 80% ltv then you will be best served unless you can get solid numbers of a fixed rate that lowers your current payment.
If you would like, I would be happy to work up those numbers, but I do not recommend refinancing unless you are going to a fixed rate and lowering your monthly payment. That is not likely with the current situation.
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If there are any homes that have sold in your neighborhood recently, you can compare the sale price and get a good idea of how much your home would go for. If you have the extra money, you could always get an appraisal but I don’t think its necessary.
I agree that if you purchased the house a year ago you probably don’t have 20% equity yet. Even in areas with strong home values such as the D.C. area home values have slowed down. We offer refinance loan quotes, if you are interested.
Your best bet would be to refinance both loans into one loan. If you plan to stay in the house for a while – I would get a fixed rate mortgage. Good luck with everything.