Thursday, August 15, 2013

Refinance of Rental # 3

Gosh, I am so glad we got refinanced our primary home last year (into a 15 year loan at 2.75% rate) before Mr. Sam was laid off from his job.  Since we knew that the lay off was likely coming that was one of the reasons we pushed to get that REFI done, obviously better to have two stable salaries to show the bank.

Yesterday, I turned my attention to Rental #3 which is the only property/loan that we have not refinanced. And I did so because the mortgage company keeps sending my notices that this property qualifies for the HARP program or some other program and that they can do a cheap and quick REFI for us.  While we need to refinance this property since this is our only non-conventional loan, its on an ARM that resets on an annual basis, it really has not made sense to do so because (1) the current rate is 3.125% and (2) I really don't think it qualifies for a REFI.

I had a lovely chat, seriously, with a mortgage broker at my current loan servicing company.  She indicated that in fact the property is eligible regardless of the fact that it is not a primary dwelling.  It is eligible because its backed by Fannie Mae, it originated prior to 6/1/09, no late payments in the last year (no late payments ever) and we haven't used the HARP program before on this loan.

But, the rates she could offer me for an investment property were in the 5% range.  And, further we would likely be forced to refinance into another 30 year term, even though we would prefer a 15 year term, because under the HARP program the REFI cannot increase the mortgage payment by more than 20%.  It makes no sense to me to impose a 20% limit on an investment property when we have several good years of rental income well above that level.

As for the LTV ratio they keep citing in the advertisements, she indicated that is simply based on the original loan amount and the amount we currently owe.  She further agreed that the LTV ration quoted in the documents  likely has nothing to do with appraisal value (I seriously doubt this home would appraise for what we currently owe).  But, even if we are underwater we can still REFI.

Right now it really doesn't make sense to refinance this property, but I'm going to start watching rates again.  I'd like to lock in a rate under 5% with a decent term before the ARM adjusts above that level.

1 comment:

Anonymous said...

Sam, Likewise, I am so glad we re-financed into a 15 year (3% rate) mortgage last year. I am usually a slow mover but I started watching the Suze Orman show last year and she kept telling everyone to refinance. So we started paying lots of extra every month so that our payment only increased $20 per month with the shorter term. Thanks for sharing how HARP works. I know my niece was able to get her home refinanced earlier this year through HARP @ a 3.87% rate.