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Refinance Question


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We closed on our home in 9/2005. We have a 1st and 2nd mortgage. The Sr. loan is a 2 yr. ARM(8.5%) and the Jr. loan is a 30 yr. (10%)

 

This is our first home, and we were thrilled to be able to get it w/ a BK in 2000 and blemished credit. We were doing really well improving our credit to get the house and after we got it. However, we ran into some unexpected financial/business problems about 6 months ago, and we almost lost the house and our credit, naturally suffered. We are in a payment arrangement w/ the mortgage co., and are working to improve our credit again.

 

My question is what will happen when it comes time to refinance this loan? Our credit scores may not be where they were when we got the loan (647 mid). However, we have put at least $50k worth of updating of this home. How much does the value of your home factor into a refinance? If we want a straight 30 year loan, what will we be looking at as far as interest rate, money down, etc? I am planning on having the home appraised again before we shop for a refi. We got 100% LTV financing with our current loan.

 

If anyone can give me some pointers or guidance I'd really appreciate it. I have about 6 months until I have to refinance, and I'm worried about it.

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How much does the value of your home factor into a refinance?

It will be a factor because it affects your loan to value ratio. The lower your LTV the more favorable terms you'll get. If your house was purchased for $100k in 2005 and you put $50k into it since then the value will have a huge impact on your refinance. Likewise the affect will be minimal if the home is worth $500k.

If we want a straight 30 year loan, what will we be looking at as far as interest rate, money down, etc?

The rate you'll get depends on your LTV, DTI, credit scores and market conditions at the time of refinancing. No one will be able to predict the rate you'll get in 6 months from now. Forecasts are predicting rates will stay fairly stable between now and then, but it's too far out to guess any or all of the aforementioned factors can change.

I am planning on having the home appraised again before we shop for a refi.

 

You will have to have the home appraised when you apply for your refi. I would suggest saving yourself the money. Check out some of the free home valuation sites out there to help satisfy your curiosity. They won't give you a 100% accurate number but it will give you an idea of where you stand.

 

 

The best advice I can give is to stay on top of your bills and keep everything current between now and then. It's a bit soon to shop at this point. Give it another 3 months. Also, do your homework about the market conditions and products available today. If you're a smart and educated consumer you'll avoid headaches down the road.

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