With the mortgage rates going down nowadays, refinancing your house seems to be a good idea. The only problem is you really can't get the best rate because the appraisals keep coming in too low. You'd either have to pay down your principal to make that "80% loan to value ratio" or you just have to settle with the next best rate. Question I have is: with the housing market still in the downward trend (at least last time I checked it), does it make sense to put in, say, 20K, to pay down your principal just to get your monthly lower? Isn't it like dumping money to mod your car (a depreciating asset)?

Anyone in similar situation?

 

It's different. That principal will eventually have to be paid down (unless you default and get foreclosed on). The question is whether you pay it down now, or later (when you sell). In the meantime, you might as well save money by getting the low interest rate. Find a no-cost refi, look around, there are some out there, don't settle for thousands in closing costs and pay it down to get to 80% LTV. This is assuming that the money you use to pay down your mortgage is money that you can really spend. Don't raid your emergency savings, retirement accounts, etc to refinance.

 

So what happens if the house value keeps going down and, got forbid, I'm "upside down" in a couple of years? Does it make any difference? I guess it wouldn't since I'm already bound to my original loan when I signed the papers in my original mortgage? And in the meantime, I'm saving monthly? Yes, this is going to be "no cost" finance...only thing I need to pay up front (other than this "pay-down") is pre-paids...insurance, few days worth of interest. And no raiding my emergency stash

 

At this point, I would keep my cash. One of our homes in FL went adjustable and the rates are so low right not that we are paying virtually nothing and just renting the house out. Our house in CO is holding value well, so it just depends on where your house is...

 

To tell you the truth, there isn't really enough information provided to be able to make a decision. Location is a huge factor. I live in Texas, where I really don't see housing prices going much lower than they are now. If you were to live in South Florida or Nevada, the situation is different. The other assumption I was making was that you weren't going to consider defaulting. For example, if you paid $300k for a house that's worth $100k now, then save your cash and default. But if you paid $300k and the house is now worth $280k, and you realistically don't expect it to go much lower, then refinance it. The longer you're planning on staying in the house, the more it makes sense to refinance it. Keep this in mind. Once this recession is over in a couple of years, you will probably never be able to borrow money again at these low interest rates again. Possibly ever.

 

I track the housing and mortgage data on a daily basis and I haven't seen much negative data in quite a while. It seems everywhere the home prices are going up. I'm sure there are pockets that go against the trends, but even Detroit values are up. San Diego is just about the only major metropolitan area where values are down.

You don't need 20% into it to refi.

Heck instead of writing a 12 page report, just go here: https://www.facebook.com/pages/Finan...75145092540694

Look at the 4% loan myth and all the sales data. I look mostly for things that affect my area (Texas) and also things that affect attitudes, because that's the thing causing the most troubles nowadays.

And NO there is no way to get rid of the closing costs in a refi. You can hide them but they don't go away. A refi is a new loan and all the same costs apply. You can pay them out of pocket, roll them into the loan or roll them into the interest rate.

Of the 3 rolling them into the loan usually works out best. That way you are only paying interest on the extra amount you borrowed. If you roll them into the rate then you are paying a higher interest rate on the whole loan for the life of the loan. It quickly will get to be the most expensive way.

 

This site wouldn't have any specific info about Tempe, AZ, would it?

Quick Google search tells me that the market is stabilizing around my neck of the woods but it seems like I pick the wrong time to do the appraisal (downward trend at the moment). You are right I don't have to have LTV at 80% but at 90% and 95% the rates aren't as attractive and I'm greedy .

A co-workers' friend is exactly doing that. He hasn't been paying his mortgage of his first house for a while now but bought another house recently...just as good as the first one, but at much cheaper price, and renting it right now. So on one hand he's saving money by not paying the mortgage of the 1st house, on the other hand, he's getting a rent from the new house. When the police knocks on the door to kick him out is the day when he kicks out HIS renters lol. (BTW, couldn't the lender seize his paycheck if they don't get the payment from him? Can he just NOT pay until lender calls the police without any repercussions?) Of course, his credit is gonna get messed up but so what? He's no longer some $200K "upsidedown" and that default record is gonna be gone in 5 years. Pretty smart I think....BUT...

As for me, this is the crucial question and I wish I had the crystal ball to see the future . I'd rather not go through the "defaulting" process, if I don't have to.

 

I am kind of in the situation you are in. When I built the house, I think I had 40% equity, now the value has plummeted by about $80 thousand. I would still be within the 80% debt to equity, but the wife and I took out a home equity loan to do some fairly expensive and highly unsuccessful test tube baby stuff. So with the home equity we are under 80%, but only until we get our tax return because all of the test tube crap is deductable so we should get a HUGE return this year to wipe out the loan.

Meanwhile, we could still get a loan and pay PMI until the tax return comes in but I just don't want to pay the stupid $80 a month or whatever for six months, well just because. We are at high fours right now on interest, and had a 3.875% on a twenty year at my bank last week and then the rate jumped so we are laying in the weeds. Just teetering around the PMI threshold.

If I can get that rate a couple months from now I want to jump on it and hopefully we will get with the 80% on an appraisal. Our property tax valuation puts us there easy, but the bank is not accepting those anymore.

If I can get the 3.875 rate on a 20yr I should just jump on it and pay the PMI for a few months. That would be the smart thing. But I hope rates stick around for a few months like they are just to avoid the whole issue.

I used to say I don't give a rats about the fact that the value tanked because I am not going anywhere anytime soon. But I am on the cusp of snagging one of two nicer gigs but with a longer commute, and if I were to get one of them, a move would make the commutes much shorter for the wife and I and I would have to give that serious thought.

 

No the Facebook page had nothing specific about Tempe. It's a way for my customers to stay on top of what's happening in the marketplace.

I've seen very little new negative info in quite a while. Most of the info has been getting better. But 15% better than ground zero isn't exactly back to normal. The point was that all over the country things have turned around so if you were really worried that the bottom was about to fall out or to continue to drop, it appears the worst is over.

Yes, there are pockets and local conditions that could make a specific marketplace go either way. I have no idea where you are located, but I thought that might alleviate your fears a little and maybe give you data you didn't have that might help you make a decision one way or the other.

At the moment we need to get the govt to quit messing with things and we need the media to begin reporting with a little less sensationalism (negative new sells) and that will help the consumer confidence to return which is basically the biggest problem we have right now in regards to real estate pricing.

And BTW the default record doesn't go away in 5 years. If THEY deem the default to have been a strategic default there's an 8 year waiting period before he can buy another home. Plus there's the damage it's doing to his credit which will affect him in a lot of other ways. It will be at least 7 years before he'll be able to get a decent interest rate and term on a car loan again.

 

I didn't know they let you off the PMI after a few month? I thought it's something they either require to have when you don't make 80% LTV for the entire duration of the loan? In any case, you should look for a loan officer that deals with a lender that does not require PMI. My house certainly didn't make 80% LTV, but they are not requiring a PMI. The lender of the first loan officer I dealt with did require it.