leowis1 wrote:Hi All,
I would sure like to take advantage of these low interest rates, but I don't feel like going through all the BS. My current rate is 5.25%. I'm 4 years into a 30yr mortgage. I have great credit and lots of equity in my house. (I hope
) Has anybody called their lender and asked them to recast your mortgage? That is reset the term (30years) and adjust the interest rate? I don't want to go through title insurance and appraisels. I think that if you have lots of equity and great credit than this is a buyers market. Let me know. Thanks!
Leo
No one has a lot of equity in their home if they are only five years into a 30 mortgage unless they put a lot of money down. Generally PMI is not required after you have 20% equity in your home compared to the purchase price. Lenders are not obligated to recast loans. Under the bailout provisions they may be court ordered. In your case, unless you have a jumbo mortgage that you bank wants to hold, they probably won't do it. You have to threaten to refi with another bank and be a preferred customer. If you can achieve a reduction in principal, that would be ideal, but not likely.
Generally, a reduction in rate is going to cost you a point, i.e. if you have a 100k mortgage, to go from your current 5.25% to the national average of 4.87 you will need to pony up $1000 (1%) in cash plus the fees of appraisal and filing and whatever other fees your bank charges in order to save 3/8% on your payment. You will probably get $1500 invested in saving $23/month. Thus, you won't "save" any money for 5.5 years. In contrast, by just putting that $1500 on your "principal only", you'll end a thirty year mortgage 16 months earlier.
My questions to you are: 1) can you make your payments now? 2) how much equity do you have? 3) What rate can you achieve and will it be fixed or variable 4) how much will points cost you 5) How much cash can you put towards points or equity 6) how long do you intend to be in this home?
In general, people should shoot for a 15 year mortgage to build equity faster and reduce lifetime interest expenses. Since you will likely achieve minor interest rate changes, it may be better to use your home as a savings vehicle by increasing your principal payments and reducing your savings account. If you need cash later, you can get a home equity loan. The road to ownership isn't paved with low rates, it's paved with more cash down, shorter terms, and bigger payments.
