Property values and refinancing.

I'm considering refinancing my 20 year fixed to a 15 year fixed (at a lower % APR (about 1 full point less now)). The only thing holding me back is determining if it is worth it based on property values and PMI. I need 80% which I can use the equity in my house to avoid PMI. I've only been paying my mortgage since Dec'05 and spoke to a consultant who estimated that if my property value went up to X amt, that I would be fine, otherwise, I would have to put cash down on the refinance to get the PMI-avoidance.

Basically I need to decide whether it is worth the risk of paying for an appraisal if I don't want to put money down... Is there a tool to find the general trend of property values in my general area (northern NJ) somewhere? We're not talking a lot I don't think but I do seem to need to have my property gain in value over the 3 years I've been here. I have not done any major work on the place other than installing a wood stove, and some minor renovations inside.

Jay

Re: Property values and refinancing.

It's a great time to refinance if you can. We just refinanced at 4.875% 30 year fixed. I thought about doing 20 or 15 years, but I prefer to have the lower payment where I can always pay more each month if I want to.

I was concerned about the appraisal value too with the housing market as it is. But in the end it appraised higher than it did a few years ago. I'd just get the appraisal done and go from there.

Re: Property values and refinancing.

I'm looking into this right now too (as did some co-workers), and one co-worker friend suggested checking zillow.com to get a preliminary idea on estimates for your property value. Don't know if there's any better (free) web resource, but zillow seems useful enough.

_Man_

Re: Property values and refinancing.

In certain areas, of which I believe NJ is one, you can use PropertyShark - Real Estate Maps, Foreclosures, Property Reports and Comparables which is much more detailed than zillow. It uses real data from various county assessor's offices. In many places you can pull up PDF's of mortgage documents and deeds! For example, I found a friend in LA had refi'ed into a $715K mortgage in early 2007. So much for privacy.

Re: Property values and refinancing.

Ooooh! Thanks for that pointer. And yeah, seems like they're providing a bit much in terms of details.

_Man_

Re: Property values and refinancing.

For those who haven't tried it yet, you can really investigate things with Property Shark. It's meant as a pay-for service for Realtors, but anyone can get a free limited account which lets you pull records for up to 6 properties a day.

For example...there was some loser guy at work who bragged about how "he" bought a house in pricey Los Altos. I pulled the file on his house on Property Shark and found out his father-in-law's name was on the mortgage. I guess I know who wears the pants in his family!

Re: Property values and refinancing.

Did you pay points, or was a normal rate? I (crudely) estimate I need 4.5% or better to make refinancing worthwhile, and your rate is getting there.

Re: Property values and refinancing.

No points. It was the normal rate. It actually dipped as low as 4.75% about a week before I was able to lock in the rate I did. But I'm certainly not complaining about 4.875%.

Re: Property values and refinancing.

thanks, I have seen 15 year fixed rates going for around 4.7% APR so I am very much interested in refinancing my 20 year fixed at 5.875%...

Jay

Re: Property values and refinancing.

There was one day when rates hit 4.625% with 0 points. I managed to lock in on that day for a 30-year fixed. Here's to hoping that my appraisal next week pans out.

Re: Property values and refinancing.

As Maxwell Smart would say, we "missed it by that much".
I swear, I must have the worst timing in the world, we refinanced from an ARM into a 30yr. fixed at 6% in late October. I would have been very happy at 4.875.

Re: Property values and refinancing.

I just checked in to mine. Currently I am at 6.7% and today I will try to lock in at 4.3% for a 15 year. I don't want a longer one because I would like to have the house paid off before I am 60. Tanks for the idea!

Re: Property values and refinancing.

Is there a "typical" refi costs estimate I can use (for NY) to better estimate if/when I should refi? So far, I've done basic estimates ignoring any closing costs or fees or whatever, but that's not realistic.

Re: Property values and refinancing.

I believe that your bank is required to give you a "good faith" estimate before you proceed. In KY it was around $2K the last I refinanced. This included survey, appraisal, and bank fees.

Re: Property values and refinancing.

My current refi is costing about $1,600.


Join the club. We finished construction and needed to square away our mortgage in July 2007-- just as rates were peaking at and just above 7% around here. We ended up getting 7.00% which sucked. Rates only peaked there for the short period of time, but it was the wrong time for us.

On the bright side, it just makes it that much more sweeter, now that I'm refinancing from 7.00% to 4.875%! Of course, with my terrible timing, this just means that rates will be in the 3 percent range soon.

Re: Property values and refinancing.

I need to recheck mine to see how long it would take to recoup costs again. I fully intend on refi'ing again.



[/quote] Of course, with my terrible timing, this just means that rates will be in the 3 percent range soon. [/quote]

No kidding! At the time our broker told us that all indications were that rates were going up, now I call him back up, protesting about it and to see if there was anything he could do about it. He says to wait that rates are going to go even lower but I am thinking about requesting some kind of a floatdown where they can work the new rate into the old loan without incurring all the C.C. He also knows I can go elsewhere so we'll see how far that gets me.

Re: Property values and refinancing.

I'll have recouped my refi costs in just 6 months.

Re: Property values and refinancing.

Thanks for the #s. With those in mind, I looked at BankRate's refi calculator. I need a 4.5% or lower rate to be worthwhile (in my view). Best case, would be to refi at 4% and 15 years, but that's just daydreaming

Re: Property values and refinancing.

I'm at 6%, 6 years into a 30-year, so I'm also not doing all that better with a refi at 4.5% into a 15-year or 20-year, so I may need to see if rates really do drop down into the 3's.

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3's???? OK, now your dreaming!! I see 4 but I have been wrong before!

Re: Property values and refinancing.

Can you expand on your math? I'm surprised you need a 3% drop to make it wortwhile. My sense was a 1% rate decrease made a refi attractive.

Re: Property values and refinancing.

Okay, maybe I was a little hasty so I did a little more number crunching. It seems I'd forgotten about my extra payments in the past (and since I got a car payment over a year ago, I haven't been adding in extra principle), and my current 30-year loan at 6% will be paid off in 1/2027 (18 years).

I was trying to keep my payments the same (lower mortgage, make up the difference in additional principle), and then seeing how many years I could shave off the loan length. I realize this might be a weird way of looking at things, but for me, it's about how long I have to pay a certain amount to pay off the house.

I'm even assuming I will have to add in $2000 to cover the costs/points/etc to the loan amount.

At 6% (of current loan) - do nothing scenario, I'm done paying off the house in 1/2027.

So keeping my payments at my current level:

at 4.75% (20-year loan), I would be able to add in $65/month in additional principle, and the house is paid off in 5/2025 (44 months ahead of 20 year schedule, 20 months ahead of current 6% loan schedule).

at 4.25% (20-year loan), I would add in $85/month in additional principle, and the house is paid off in 7/2024 (54 months ahead of 20 year schedule, 30 months ahead of current 6% loan schedule).

at 3.75% (20-year loan), I would add in $104/month in additional principle, and the house is paid off in 10/2023 (63 months ahead of 20 year schedule, 39 months ahead of current 6% loan schedule).

I guess 4.75% 20 year loan would make sense to me now that I crunched the numbers.

To sum up, for new 20 year loan (at current payment levels):
At 4.75% - shaves off 20 payments from current loan
at 4.25% - shaves off 30 payments from current loan
at 3.75% - shaves off 39 payments from current loan

Starting with 4.75%, looks like each reduction of 0.25% of interest will net me 5 less payments (for my payment situation).

I can shave off more months after I pay off the car in 2.5 years from now, as well, by applying more principle if I choose to do so (or just sock it away to bolster the emergency nest egg.

Re: Property values and refinancing.

If you are interested in what residential real esate is up to, check out some of the links I look at on a regular basis:

The Housing Bubble Blog
Mr. Mortgage’s Guide to the TRUTH!
Housing & Real Estate -- Seeking Alpha
Riverside and San Bernardino real estate blog (local Inland Empire info)
HouseBubble.com (links to articles and blogs)

Re: Property values and refinancing.

Patrick,

I think the bottom line is you just need to see how much interest you would be paying over the life of the loan currently and in each scenario. I wouldn't worry much about the number of payments. It's all about how much total interest you will pay.

For example, I'm in a couple years in to a 30 year loan now and when I refinance I'll start the clock ticking again at 30 years. Even though by refinancing I'm going to extent my payments by about 24 months, I'm actually going to save over $90,000 in interest.

A no brainer for me to refinance.

Re: Property values and refinancing.

But your math makes more sense now, Patrick. But if you haven't, be sure to consider the effective investment value of tax-deductible 6% (or lower) interest rate versus investing your funds in other areas.

I pay an additional 10% on principal each month. In my refinancing considerations, I'm looking for a rate that gives me a 15 year mortgage with less than a 20% increase in total monthly payments. This would cut my mortgage nearly in half and save large sums of interest. 4.5% does it for me.

Re: Property values and refinancing.

I just got back from the bank. If we go from a 6.9 with 18 years left to a 4.8 for a 15 year, we will save over $30K. Costs will be just under $2K. We won;t get to lock into the rate until Tuesday. Hopefully it will go down.

Re: Property values and refinancing.

Interest paid from this point forward:

No Re-fi (Do nothing - 6%, 19 yrs left): $44275

4.75% 20-yr re-fi (pay extra to maintain current mortgage level, 17.66 yrs): $31493

4.25% 20-yr re-fi (pay extra to maintain current mortgage level, 15.50 yrs): $26293

3.75% 20-yr re-fi (pay extra to maintain current mortgage level, 14.75 yrs): $21810

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4.75% 20-yr re-fi (pay $70 lower monthly payment schedule): $39668

4.25% 20-yr re-fi (pay $84 lower monthly payment schedule): $35004

3.75% 20-yr re-fi (pay $103 lower monthly payment schedule): $30451

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4.75 15-year re-fi (pay $30 higher monthly payment schedule): $28807

4.25 15-year re-fi (pay $12 higher monthly payment schedule): $25496

3.75 15-year re-fi (pay $6 lower monthly payment schedule): $22248

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Looks like I should pursue a 15-yr re-fi if I can get a rate at 4.75 or below for a minimum interest savings of $15000.

Re: Property values and refinancing.

As a loan processor, alot of the loans I have seen in the past month have been refinances, either going from a higher to lower percentage or from 30 years to to one of 25 years or less.

That being said, get a realtor to pull a comparative market analysis for you. That should give you some sort of ballpark figure as to what your house is worth. Be wary though. It may not be worth as much as you think it is.

Avoiding PMI is good. However, you may not be able to.

One last alternative is for you to not refinance. Rather, increase the amounts of your monthly payments and have the excess go torwards the principal of the property.

Put another way, $100 a month for 10 years = $12K. You would save, roughly, a minimum of $18K worth of interest. (Figure $12K x 2.5. That 2.5 figure is what you typically end up paying in principal and interest on any mortgage over the life of the loan.)

If your payment won't be much more or will be lower by refinancing into a mortgage that has a shorter term then do so. However, never rule out increasing your monthly payment. Just be sure the extra is applied to the principal rather than the interest.

Good luck!

Re: Property values and refinancing.

I have about 40% equity (from original price paid), so PMI isn't an issue for my situation.

If I keep my original existing loan as-is:
Once I pay off my car in about 3 years, I'd been toying with the idea of just adding my monthly car payment to the principle each month (since I've budgeted that amount for mortgage/car payments), which allows me to pay off the house by 11/2019, just under 11 years from now (otherwise, I keep paying until 2027 with the nominal monthly payment).

If I pursue a 15-year 4.75% re-fi, and apply my car payment to the mortgage principle, I can pay off the house by 4/2019.

So, with an aggressive payback schedule, re-fi nets me 7 month payment for my re-fi efforts over keeping my existing loan.

Hmm...if I tossed in another $50 over my current monthly mortgage/car budget, I pay off the mortgage in 4/2019. That would also be do-able with enough fiscal discipline, but I only save $282 over the re-fi scenario, might not be worth the hassle.

Of course, this assumes I don't incur another car payment for 11 years, which might not be feasible (but I did drive my last car 13 years). Ah well, nice to dream about owning a house in the clear in just 11 more years.

Re: Property values and refinancing.

I'm glad I locked in the 4.875% fixed rate when I did. Since then rates around here have climed to 5.50%-5.75%.

We're still waiting to actually close. Our rate is locked in for 45 days which will be up on Feb 20. Our closing is tentatively scheduled for Feb 13. The title agency/law firm my bank uses for closings (as do many of the banks around this area) got swamped with refis in January and got really behind. I was afraid for a while that the clock would run out on my locked in rate. I have no idea what would have happened if the deadline had passed and if I would have had any recourse since it would not have been my fault that the closing took longer than the 45 day lock-in period. The bank never gave me an answer on that one. They said they have never had that happen.