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refi dilemna
Old 09-02-2011, 10:27 AM   #1
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refi dilemna

This is unbelievable. Just purchased a house in a nice area. I paid 357k and put down 85k. So about 25% down. My current rate is 4.875% and I just found a no cost loan at 4.125%. The savings is 130 a month. No fees and no out of pocket. I was currently 6 months into the purchase and figured with the improvements I made outside the appraisal would come in. Well, lo and behold, was I wrong. The appraisal came in at 330k. That puts me about 8000 under the 20% equity needed to make this deal. The lender told me I had three options. (1) Talk to the realtor and see if she can find comps in the area that the appraiser didn't look at and see if you can get the appraisal adjusted. (2) Come to the closing table with the 8000 to get to the 20% equity portion. (3) Nix the deal and be out the 365 for the appraisal and app fee. Naturally (1) would be preferrable if the appraiser goes along with an adjustment. (2) I have the cash for the equity adjustment. It would take about 3 and a half years to recover. I am retired and this is our last house. But do I want to put more money into a black hole. Buying a house today seems like buying a car and watching it depreciate as soon as you leave the showroom. (3) Maybe just chalk up the 365 as a small loss and go on with my life. I'm all ears if anybody has any insight into my dilemna. Thanks all.
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Old 09-02-2011, 10:34 AM   #2
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Was this the same appraiser you used when purchasing the house for $357?
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Old 09-02-2011, 11:00 AM   #3
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Definitely try for #1. Comps are hard right now, cause foreclosures can really bring them down, but if you can prove that the comps that the appraiser used are for houses that are smaller, or in worse condition than yours, you might be able to get it adjusted. (A friend had to do this recently).
Even if you can't get it adjusted enough, even some of an adjustment will help with #2, and decrease what you need to pay.
Good Luck!
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Old 09-02-2011, 11:03 AM   #4
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The savings is 130 a month. ... (2) Come to the closing table with the 8000 to get to the 20% equity portion.
So you forgo interest on the $8k which decreases the amount of your outstanding loan, and you get back $130/month. Sounds like a good deal.
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Old 09-02-2011, 11:06 AM   #5
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No, this is not the same appraiser and I don't think you can use a past appraisal. The lender said he would go to 4.00% from the original offer of 4.125%. House payment would go from 1440 to 1260. With the 8000 to bring to the closing table to get to the 20% equity stake. My math shows me I break even after about 3 and half years. This is my last house so I will be here much longer than that probably. I just don't know if I want to drop another 8 grand into real estate. I walked away from old house with a capital gain of 225k and used 85k of that for the down payment on the new. I invested the rest. So I do have some cash and my pension and investments are providing what I need. The money would be coming from a mm earning 1% so it is not like I am losing much there as far as investment opportunity.
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Old 09-02-2011, 11:10 AM   #6
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I am with GregLee on this.... sounds like the interest rate is great and I would not pass it up just because I had to invest another $8K into the property that I planned to live until I die... I would not care that much about resell value...


I would try #1 first though... appraisers are causing a LOT of problems with sales now... I have heard of a number that have fallen through because of a low appraisal and the parties could not come up with the difference... this is making the housing crisis last longer IMO...

As an example... my boss moved his mother into a home... she had a nice house just outside a very small town... the appraisal came in at $225K... he sold it for over $330K... there were enough rich ranchers around that wanted the house that it sold for a lot more than appraised value.... cash is king....
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Old 09-02-2011, 11:11 AM   #7
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My math shows me I break even after about 3 and half years. This is my last house so I will be here much longer than that probably.

I do have some cash and my pension and investments are providing what I need. The money would be coming from a mm earning 1% so it is not like I am losing much there as far as investment opportunity.
On paper it appears to be a slam-dunk.
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Old 09-02-2011, 11:30 AM   #8
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Get it done quick, you are over-thinking it. Keep in mind a personal residence is just a place to live, once you strip the emotional attachment out of it. Since you are refinancing in a down market, you'll get the upside tick with a small mortgage and a great interest rate, so there is no downside anyway...........
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Old 09-02-2011, 11:35 AM   #9
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I would put the 8K toward the loan and close the deal. Look at it this way. You owe the bank 272K regardless what the house is worth. You kick in another 8K and you owe the bank 264K regardless what the house is worth. It is not like the 8K was used for closing costs or other fees, it did reduce your mortgage.
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Old 09-02-2011, 11:38 AM   #10
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For starters, all you would be out is the $365 for the appraisal. Can you control who does the appraisal? You can if you are paying for it. Hire your own guy. It's their choice what they use for comps.
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Old 09-02-2011, 11:51 AM   #11
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Sorry to hear about the refi hassle. Based on the rate/monthly payment, I assume it's a 30 year note.

I would try option #1 first and if needed, come up with the $8k to complete the deal.

If you take the face value of the appraisal, you are already out the $8k. Do you want to pay interest on the loss too?

What do you save on the life of the loan comparing the loans? Is it worth it in the long run?
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Old 09-02-2011, 11:51 AM   #12
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So for 8 grand you are buying a lifetime monthly annuity of $180. If you price SPIAs I think you will find that this is economically compelling.
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Old 09-02-2011, 12:07 PM   #13
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Your letting your frustration of feeling like you've lost money from your purchase price versus new appraisal affect your thinking. In a year you would be kicking yourself. You already said this is your last house.
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Old 09-02-2011, 12:31 PM   #14
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I just want to know where I can get a 4% no closing cost refi!!!


I think my balance is to low to get it though...
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Old 09-02-2011, 12:31 PM   #15
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Pay the $8K and refi.
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Old 09-02-2011, 12:43 PM   #16
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Hi,

As others have said... you are not putting any more $$$ into the deal. Just paying down principal you already owe - so go ahead and save interest!
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Old 09-02-2011, 12:58 PM   #17
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One of the rare unanimous threads. I like the way Brewer puts it. A lifetime (or 30 year anyway) annuity of $180/month for a cost of $8K. Do it!
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Old 09-02-2011, 01:09 PM   #18
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Yeah, I guess I am over thinking this. Actually, I had two ways to go. I was going to get 4.125% at zero costs or 3.99% and 2000 dollars worth of closing costs. I was just informed by the lender that he was going to waive the 2000 dollars in cost on the 3.99% and I actually had to come up with 6000 for the equity stake. Sometimes things take a little while to sink in. I'm going to go ahead and make the deal. Again thanks to this educated and distinguished panel.
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Old 09-02-2011, 02:11 PM   #19
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Yeah, I guess I am over thinking this.
Well, maybe not over thinking, since your reluctance to proceed may have convinced the lender to make you a really good deal.
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Old 09-02-2011, 02:36 PM   #20
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One of the rare unanimous threads.
Well, we can't have that, can we? It's not the er.org way!

So, thinking this over, you all obviously missed.... hmmm, nothing? I have to go along with everyone else - The $8,000 (now $6,000?) isn't being 'invested' in the house (unless you plan to walk away from the mortgage), it is merely a transfer from your portfolio to reducing the outstanding liability of the mortgage. Your NW has not changed by this.

Congrats on a great rate!

-ERD50
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