Your Questions About Mortgage Refinancing Rates

Donna asks…

Lowered refinanced rates?

If the government wants to stimulate the economy and get money flowing again? What would be the ramifications of reducing the interest rates on homes to 3% and allowing homeowners under say $500.000 to refinance to pay there original loan off and thus having that extra money they’d be saving each month go back into the economy. Not to mention all the fee’s etc that would be generated.

John answers:

Before you can refinance the house needs to be worth at least what the original outstanding mortgage amount is. Otherwise it does not make sense. Why would a lender be willing to refinance a $500K
mortgage on a house that now appraises for only $300K?

The problems isn’t the homeowner that bought before the “Bubble” but the ones that bought during the bubble and now have mortgages that are thousand of dollars higher than the house is worth. The principal note is still $500K and needs to be repaid but the house will never again sell for that price… So why bother? Most of these people will walk away from their mortgages and houses and try again in 3 years. That is the nature of the beast…
And many of them did not have conventional fixed rate mortgages but went for the interest only option ARM… And this beast is what they would like to refinance out of since their resets are coming due and that means their payments will be interest and principal payments.
Much higher than their interest only payments.

Linda asks…

I hold daughters mortgage loan can I refinance it at a lower rate?

My daughter purchased a house in May and I financed the mortgage rates. She has made the first 2 payments and I want to redo the loan papers at a new rate to lower her payments since Federal AFR has dropped. Can I just make up a new loan schedule and paperwork saying we are refinancing the loan? Is that legal

John answers:

Do you mean her mortgage is through you? If you are the lender, you can set any rate you want, it doesn’t have to be based on AFR. You could do 1% if you wanted to.

If you mean you took out the mortgage b/.c she coudln’t. It would be a waste of money to refinance based on the rates dropping so little in 2-3 months.

Jenny asks…

Help with mortgage dilemma?

I recently bought a house will an option arm that is tied with the one-month Libor. Ever since I got the mortgage, the Libor rate has increased. My current rate is now 8.25.

If I refinance, I stand to pay a 3% penalty (9,000). Is there any way I can refinance or change the type of loan without paying a penalty.

Any assistance would be greatly appreciated…

John answers:

Interest rate has been going up regardless whether you are using libor or other interest benchmarks. At this point even if you refinance you won’t get that good a rate, plus the penalty you will have to pay. Most lenders will allow you to extend your mortgage amortization period and keep your monthly payment the same. Talk to your lender and see if it is an option. My other advise is to make extra payment whenever you can. Good luck.

James asks…

Mortgage Refinance Question?

I have to opportunity to refinance my mortgage and cut my interest rate by 2% (7.5% to 5.5%), which will save me $350 a month. We have $265K left on a $271K loan. When all the closing costs ($3,900), insurance and escrow are rolled in, the cost comes to $281K. Are we making out on the deal or is this a bad decision? Side note: We are unsure of how long we will be living in the house. At LEAST the next 2-3 years.
Additional Notes: The escrow payment is to replenish what is in there with the new escrow company. Lender says I will be receiving a check from my current escrow with essentially the same amount.

John answers:

This is a tremendous savings. If you place the mortgage savings in some type of account that will draw interest you will be further ahead of the game. Even if you only put a portion of the savings from your mortgage in savings account you would still be ahead of the game.

The way this would work to your advantage is the savings even if for only 2-3 years. Your savings for the first 2 years would be approximately $8400 and approximately $12,600 for 3 years plus any interest gained on any portion of the part you decide to save.

Your points and fees could be tax deductible over the life of the mortgage loan if you decide to complete this refinance.

This refinance makes sense on several accounts.

#1. You have been paying mostly interest on your current mortgage loan.

#2. Your interest rate would go from 7.5 to 5.5 thus a two point difference.

#3. Your monthly payment would be reduced by $350.00 (If you put some of the savings in an interest bearing account your potential savings would be more.)

#4. You have the option of adding any portion of the $350 savings to the new monthly mortgage thus reducing your interest on your new loan and paying it off early if you decide to remain in the house for the duration of the mortgage loan.

So in this scenario I would say this is a pretty smart thing to do.

For legal and tax matters you should always contact you attorney and tax consultant.

I hope this has been of some benefit to you, good luck.


Robert asks…

I have a first mortgage with a great 5.5% rate. I want to refinance tne 2nd mortgage only.?

The 2nd mortage is 71K, and the principal never goes down as I can’t afford to pay anything but the interest. Can I refinance the 2nd mortgage only so I can get it paid? Thanks
Both loans are with Countrywide made back in 2002. The 1st mortgage amount is down to 150K – the 2nd mortgage was (and pretty much remains) around 71K – the home appraised for 330K before the bottom fell out of the market – still similar townhomes in my DC bedroom community are selling for 280K.

John answers:

Yes, banks will allow you to refinance your second mortgage only if you want it. Make sure you go to to find out your home’s property value for the higher it is, the lower your 2nd mortgage’s refinance interest rate is. Thus, you will save money and your interest will be even lower for having a good credit score. Also, make sure you look for the mortgage rates of credit unions in your area. Credit unions tend to have the lowest rates available.

I am curious for I to am refinancing my home mortgage, who is your mortgage company that is giving you 5.5%? That is an excellent rate. Please let me know.

Thanks and I hope my answer helps!

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