Underwater refinancing?

[Jenksismyhero]

 

I just don't know how much less, and the problem is, I don't want to spend a few hundred dollars getting it reassessed for no reason.

 

A year and a half ago I bought a house that was appraised for about 30-40k more than what I paid and I got a good interest rate (5%). I dunno if it's worth looking into refinancing or not.

Edited October 25, 2011 by Jenksismybitch

[Jenksismyhero]

Also a big fan of this:

 

White House officials acknowledge that the mortgage plan, like a program to reduce student loan costs to be announced Wednesday in Denver, won’t have the same economic impact as the president’s jobs plan. Republicans in Congress have blocked the jobs proposal, a $447 billion package of tax cuts and spending, including $15 billion for communities hard hit by foreclosure.

[Balta1701]

A year and a half ago I bought a house that was appraised for about 30-40k more than it's worth and got a good interest rate (5%). I'm kinda in the same boat here. I dunno if it's worth looking into refinancing or not.

Just did some math to check.

 

If you're at exactly 5.00% right now, and you have a mortgage for ~$165k, and you can refinance your way down to 4.2% (sorta close to where things are now), and both are 30 year fixed...then you save yourself ~$30k in interest over the full lifetime of the loan.

[cabiness42]

 

I just don't know how much less, and the problem is, I don't want to spend a few hundred dollars getting it reassessed for no reason.

 

Do you not live in a jurisdiction that does yearly assessments for the purpose of property taxes? I know that appraisals and assessments are two different things, but in most places they do tend to trend similarly.

 

I haven't gotten any appraisals done, but I know what the county assessments have done in the last 4 years and can reasonably estimate what an appraisal would be based on that.

 

[southsider2k5]

A significant number of the people who signed up for the HAMP program weren't in danger of foreclosure until they entered the program either.

 

Just be real careful on this one...there's no reason to trust the administration to set this program up well right now. Don't rush into it.

 

I see why we should give the government another half of a trillion dollars... they did so well with the first trillions...

[Y2HH]

Just did some math to check.

 

If you're at exactly 5.00% right now, and you have a mortgage for ~$165k, and you can refinance your way down to 4.2% (sorta close to where things are now), and both are 30 year fixed...then you save yourself ~$30k in interest over the full lifetime of the loan.

 

That's not enough to refinance, after fees and closing costs up front. They say the refi has to take off at LEAST 1 full % to matter.

 

It can also be a pain to refi, for example I'm currently at 5.25%, and there are a lot of headaches involved in doing it, not to mention fees, closing costs, etc.

 

Add to that, you're re-extending your mortgage to 30 years again, which sucks...even if it saves you money over that span of time. the problem with saving 30k over the span of 30 years is...well, that'll probably end up not being much considering inflation.

Edited October 25, 2011 by Y2HH

[Balta1701]

I see why we should give the government another half of a trillion dollars... they did so well with the first trillions...

They spent $2.5 billion on the HAMP program so far. There's another $50 billion or so which simply was never spent. So, yeah, they did exactly waht you wanted with that money...saved it.

[NorthSideSox72]

Do you not live in a jurisdiction that does yearly assessments for the purpose of property taxes? I know that appraisals and assessments are two different things, but in most places they do tend to trend similarly.

 

I haven't gotten any appraisals done, but I know what the county assessments have done in the last 4 years and can reasonably estimate what an appraisal would be based on that.

 

Those government appraisals for the purpose of taxation are pretty useless in terms of actual value.

 

One way to get a decent idea cheaply, is a site like Zillow, where you give it your property info and it gives you a quick and dirty appraisal based on local sales and sale prices. Won't be perfect, but it will give you a decent idea.

 

[Jenksismyhero]

That's not enough to refinance, after fees and closing costs up front. They say the refi has to take off at LEAST 1 full % to matter.

 

It can also be a pain to refi, for example I'm currently at 5.25%, and there are a lot of headaches involved in doing it, not to mention fees, closing costs, etc.

 

Add to that, you're re-extending your mortgage to 30 years again, which sucks...even if it saves you money over that span of time. the problem with saving 30k over the span of 30 years is...well, that'll probably end up not being much considering inflation.

 

yeah, that's kinda what i was thinking. if this is gonna cost me 3-4k in cash to refinance, and I end up saving 100 bucks a month, that's not really worth it over 30 years. And I dunno that we've hit the absolute bottom on interest rates yet. A year and half ago I was hearing that 5% was about as low as banks would go. well now they're at 4...

[Balta1701]

yeah, that's kinda what i was thinking. if this is gonna cost me 3-4k in cash to refinance, and I end up saving 100 bucks a month, that's not really worth it over 30 years. And I dunno that we've hit the absolute bottom on interest rates yet. A year and half ago I was hearing that 5% was about as low as banks would go. well now they're at 4...

There's certainly still room on the downward side if Europe finally breaks open.

[southsider2k5]

They spent $2.5 billion on the HAMP program so far. There's another $50 billion or so which simply was never spent. So, yeah, they did exactly waht you wanted with that money...saved it.

 

Bye, bye big picture!

 

[EvilMonkey]

I did none of the above. The only thing I did was buy a house about 9 seconds before the market blew up in my face.

And I believe you also said you were not in danger of foreclosing. I am in your boat, sort of. Bought in 2005, put a nice chunk down from the sale of our old house, and as of about a year ago, my house is worth about 35% less than what I paid for it. I am not underwater, but all the downpayment and equity so far are gone.

[Harry Chappas]

Three years ago I took out all of the equity in my house and refinanced into an FHA loan for 95% of the home's value at a 30 year fixed at 5%. I used all of the equity money to improve my financial situation (no cars, trips, etc.) The downside I have to pay PMI, which is tax deductible.

 

I am now in the process of a streamlined FHA refinance. The fees are minimal and there is no appraisal as I have made all of my payments on time. My rate is 4% which when you look at the tax benefit it is almost a wash.

 

When the market recovered last year I also took a loan against my 403B at 5.3% to payoff some debt. The market is not returning 5.3% any time soon so I figured I would pay myself some interest instead of the bank.

 

The FHA program has done me right.

 

I make three extra house payments a year and should have my home paid off well under the 30 year limit but I paid what I want when I want at the nice rate of 4%.

 

 

 

 

 

 

 

 

[NorthSideSox72]

Three years ago I took out all of the equity in my house and refinanced into an FHA loan for 95% of the home's value at a 30 year fixed at 5%. I used all of the equity money to improve my financial situation (no cars, trips, etc.) The downside I have to pay PMI, which is tax deductible.

 

I am now in the process of a streamlined FHA refinance. The fees are minimal and there is no appraisal as I have made all of my payments on time. My rate is 4% which when you look at the tax benefit it is almost a wash.

 

When the market recovered last year I also took a loan against my 403B at 5.3% to payoff some debt. The market is not returning 5.3% any time soon so I figured I would pay myself some interest instead of the bank.

 

The FHA program has done me right.

 

I make three extra house payments a year and should have my home paid off well under the 30 year limit but I paid what I want when I want at the nice rate of 4%.

Not sure how the bolded makes any sense. The interest is a tax deduction, not a credit, so it reduces your tax liability by that amount against the % you are already paying. So for example, if you are paying roughly 20% on your income tax, then you save 20% of your total interest payments. It is 20% of 5%, or of 4%, or whatever. There is no level of interest that allows the tax deduction to make it a "wash".

 

[StrangeSox]

Not sure how the bolded makes any sense. The interest is a tax deduction, not a credit, so it reduces your tax liability by that amount against the % you are already paying. So for example, if you are paying roughly 20% on your income tax, then you save 20% of your total interest payments. It is 20% of 5%, or of 4%, or whatever. There is no level of interest that allows the tax deduction to make it a "wash".

 

My dad gets really frustrated at people that chase tax deductions thinking that they're credits.

[southsider2k5]

My dad gets really frustrated at people that chase tax deductions thinking that they're credits.

 

It is just like the person who spends s***loads of money on sale items they don't need and talks about how much they saved!

[StrangeSox]

It is just like the person who spends s***loads of money on sale items they don't need and talks about how much they saved!

 

Marketing/advertising is the spawn of the devil.

[Middle Buffalo]

I'm in a similar situation. I can make my payment, but I'd like to get a better rate and lower my payment. Can't refinance without an appraisal, though. And my house won't meet the current regulations. What doesn't make sense to me is that I know that Chase didn't sell my loan, yet they won't refinance me because the house is underwater. If I owe them $300K, and I'm current on my payment, and I'm not looking for relief from the principle owed, why won't they refinance my loan? I'm willing to pay the full amount, I just want to get the lower interest/payment.

 

The really bad thing is that the banks were committing fraud when they loaned money to people in 2007-08 before the meltdown. They knew that there were thousands of houses that were going to be foreclosed, and these foreclosures would drive down housing prices, yet they still accepted the appraisal values on new houses. So, if my house was bought for $350K, but the foreclosures were going to make it worth $280K 9 seconds after I closed on it, they shouldn't have loaned the money. They were greedy, yet we bailed them out.

[Harry Chappas]

Not sure how the bolded makes any sense. The interest is a tax deduction, not a credit, so it reduces your tax liability by that amount against the % you are already paying. So for example, if you are paying roughly 20% on your income tax, then you save 20% of your total interest payments. It is 20% of 5%, or of 4%, or whatever. There is no level of interest that allows the tax deduction to make it a "wash".

 

My point wasn't that it was a one-for one credit. What I meant was more that at 4% I am in no hurry to pay it down. My payment has dropped almost 20% over the last 5 years due to the interest rate dropping.

 

If rates get to the point that you can actually get a return on you money then I will take the extra amount that I put into my house via excess payments and get a return over 4%.

 

The tax deductability is a bonus.

 

 

[Jenksismyhero]

I'm in a similar situation. I can make my payment, but I'd like to get a better rate and lower my payment. Can't refinance without an appraisal, though. And my house won't meet the current regulations. What doesn't make sense to me is that I know that Chase didn't sell my loan, yet they won't refinance me because the house is underwater. If I owe them $300K, and I'm current on my payment, and I'm not looking for relief from the principle owed, why won't they refinance my loan? I'm willing to pay the full amount, I just want to get the lower interest/payment.

 

The really bad thing is that the banks were committing fraud when they loaned money to people in 2007-08 before the meltdown. They knew that there were thousands of houses that were going to be foreclosed, and these foreclosures would drive down housing prices, yet they still accepted the appraisal values on new houses. So, if my house was bought for $350K, but the foreclosures were going to make it worth $280K 9 seconds after I closed on it, they shouldn't have loaned the money. They were greedy, yet we bailed them out.

 

I dunno that this is true. The bank doesn't typically loan out money when it knows it'll lose money. If they loaned you 300k knowing the house would be worth 280k the next day, they've just lost 20k or more. If anything they might have been dumb to not realize what they were doing would create a huge gigantic problem. But I don't think they did this intentionally.

[NorthSideSox72]

I'm in a similar situation. I can make my payment, but I'd like to get a better rate and lower my payment. Can't refinance without an appraisal, though. And my house won't meet the current regulations. What doesn't make sense to me is that I know that Chase didn't sell my loan, yet they won't refinance me because the house is underwater. If I owe them $300K, and I'm current on my payment, and I'm not looking for relief from the principle owed, why won't they refinance my loan? I'm willing to pay the full amount, I just want to get the lower interest/payment.

 

The really bad thing is that the banks were committing fraud when they loaned money to people in 2007-08 before the meltdown. They knew that there were thousands of houses that were going to be foreclosed, and these foreclosures would drive down housing prices, yet they still accepted the appraisal values on new houses. So, if my house was bought for $350K, but the foreclosures were going to make it worth $280K 9 seconds after I closed on it, they shouldn't have loaned the money. They were greedy, yet we bailed them out.

 

And what has happened now, is, the pendulum has swung too far the other way. Whereas before, someone with marginal or worse credit could buy an expensive home with 5% or even less (or zero) down. Now, you have to have sterling credit, massive income and 20% down to get a loan at any decent rate (if at all). Reality should be somewhere in between.

 

 

My point wasn't that it was a one-for one credit. What I meant was more that at 4% I am in no hurry to pay it down. My payment has dropped almost 20% over the last 5 years due to the interest rate dropping.

 

If rates get to the point that you can actually get a return on you money then I will take the extra amount that I put into my house via excess payments and get a return over 4%.

 

The tax deductability is a bonus.

 

Well yes, at 4%, it is only marginally over inflation (and will likely be less than inflation when the recovery does finally kick in). So definitely you did a good thing there.

 

We got lucky, bought late last year during a rate dip, and got 4.125% fixed for 30. Also got a foreclosure home, so the price was right.

 

[max power]

Appraisers estimate the value of a home almost entirely on recent past sales, not future projections. They still do that, and its not the sole fault of either entity.

[lostfan]

And I believe you also said you were not in danger of foreclosing. I am in your boat, sort of. Bought in 2005, put a nice chunk down from the sale of our old house, and as of about a year ago, my house is worth about 35% less than what I paid for it. I am not underwater, but all the downpayment and equity so far are gone.

Correct... I'm doing everything I'm supposed to, can't get a break. I'm not going to whine too much, but some help would be nice considering the only people who DO get help for the most part are people who've made mistakes or done things they really had no business doing. Meet me halfway, help me build equity because right now it's impossible. If I could do this then I would probably keep paying what I'm paying now for a while until I build equity with the reduced payments. Yeah my tax deduction will be less but I'll be paying a lot less in interest.

[lostfan]

[/b]

 

I dunno that this is true. The bank doesn't typically loan out money when it knows it'll lose money. If they loaned you 300k knowing the house would be worth 280k the next day, they've just lost 20k or more. If anything they might have been dumb to not realize what they were doing would create a huge gigantic problem. But I don't think they did this intentionally.

Do they really? I mean, I'm still paying them money as per my contract and whatever the house is worth is irrelevant to them. If anybody is losing money it's me (even though it's not "money" in the traditional sense, but personal wealth definitely)

[southsider2k5]

Do they really? I mean, I'm still paying them money as per my contract and whatever the house is worth is irrelevant to them. If anybody is losing money it's me (even though it's not "money" in the traditional sense, but personal wealth definitely)

 

Yes they do to. Because of Sarbanes Oxley they have to write down the value of that asset versus their loan portfolio to see if they are still maintaining their capital requirements. It is why banks have gone under in many places.