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We purchased our home in Florida in 2006, and of course it is now worth about 60% of what we originally paid, even though we got a good deal at the time. We have an 80% loan at 7% which is tied to LIBOR, so we anticipate that will be going up in the future. We have a fixed 20% loan at 10% interest rate. We have managed to amass a fair amount of money in the past couple years and now need to decide the best way to dig out of the 80/20 hole. We have the funds to pay off the 20% loan completely but since that loan is fixed, I'd really rather address the ARM first if at all possible.

(If we are careful, and are allowed to just re-fi the first with an FHA, we would have 1. the difference between what we owe on the first and the current home value 2. 3.5% down, 3. 3% in closing costs.

My questions are:

1. The same lender holds both the first and second, so will this be helpful with subordination of the second?

2. The lender makes FHA loans. so do we try through them first?

3. Can we even do a 3.5 down on a re-fi through FHA?

4. Will 3% cover FHA closing costs? ( Taxes and insurance prepaids will be minimal, since the house is worth so little now.)

5. Does "declining market" status affect the mortgage insurance? How so?

 

Thanks for any help you can give.

 

BK

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We purchased our home in Florida in 2006, and of course it is now worth about 60% of what we originally paid, even though we got a good deal at the time. We have an 80% loan at 7% which is tied to LIBOR, so we anticipate that will be going up in the future. We have a fixed 20% loan at 10% interest rate. We have managed to amass a fair amount of money in the past couple years and now need to decide the best way to dig out of the 80/20 hole. We have the funds to pay off the 20% loan completely but since that loan is fixed, I'd really rather address the ARM first if at all possible.

(If we are careful, and are allowed to just re-fi the first with an FHA, we would have 1. the difference between what we owe on the first and the current home value 2. 3.5% down, 3. 3% in closing costs.

My questions are:

1. The same lender holds both the first and second, so will this be helpful with subordination of the second?

2. The lender makes FHA loans. so do we try through them first?

3. Can we even do a 3.5 down on a re-fi through FHA?

4. Will 3% cover FHA closing costs? ( Taxes and insurance prepaids will be minimal, since the house is worth so little now.)

5. Does "declining market" status affect the mortgage insurance? How so?

 

Thanks for any help you can give.

 

BK

Since you do not currently have an FHA loan the Max CLTV (combined loan to value) allowed is 115% so I assume to do anything you will have to put some money towards that second. I dont know your actual numbers but assume your total will be at or above the 115% - of course the subordination request is where it will need to start. If you are doing a non cashout refi into an FHA loan you can go to the 96.5% limit. Starting with your current lender is a good place to start -If you have the cash to pay off the second and do a refi into FHA getting rid of that 10% rate cant be a bad thing....

 

Good Luck

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