Countrywide won’t help me refinance even with good credit. Shoud I refi into an interest only?

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I have excellent credit (FICO 780), good job, and have little debt (mortgage, 1 car payment, 1 credit card).

About 16 months ago, I put 20% down and got a 6.25% interest rate on my current home. The house was brand new and the Builder paid the first property tax installment – which threw me off in terms of how much the property tax was going to be. Well, my monthly payment just went up by over $ 400 (I impound prop taxes and insurance).

Bottom line, I may relocate for more pay and may want to rent my house…..but I need to lower the monthly mortgage in order to rent it out without being in the negative.

Is it smart to refi my current loan (fixed 6.25% with no PMI) to an 80/20 or interest only loan? This would get my payments down as well as expedite the reassessment of my property taxes. That way I could possibly rent it for what the cost of the monthly payment would be?

Thanks for your help.

Thanks for the advice

8 Comments
  1. Reply
    Abby W
    May 19, 2011 at 2:32 am

    If you have a fixed rate loan with no PMI, you’re doing well for your financing, you should refinance only to get a lower fixed rate, not to change the structure of the loan. Perhaps you should increase the rent amount? The general rule is you charge 1% of the house value for 1 month’s rent.

  2. Reply
    Colanth
    May 19, 2011 at 3:31 am

    If Countrywide won’t refi you at a rate you like, look elsewhere. Find a hungry mortgage broker (or small lender that still has access to funds) and tell him that he should call you when he can get you a mortgage that’s fixed, fully amortized and no more than $ X per month for the mortgage (be sure to calculate your desired total monthly payment, then subtract costs – taxes, maintenance, insurance, etc.). Last time I did that, I got 4.875% fixed 30, which I’m not likely to see again for many years.

  3. Reply
    PelMel
    May 19, 2011 at 4:09 am

    It depends on how long you plan to hold onto the house. If you’re in it for the long haul, it might make sense to refinance for the best interest rate you can find, but not an interest only loan. You won’t want to refinance again after renting, because you’ll pay a higher interest rate as a landlord. So get a loan that you’ll like for the foreseeable future.

    If you plan to sell in a few years, an interest only loan might make sense. Don’t forget to look at closing costs–that should be a consideration either way.

    Lots of people to don’t put cash in their pocket from renting. But there are benefits that you’ll see come tax time. You can write off expenses, including depreciation, and may be able to claim a loss. And any income won’t be subject to Social Security or Medicare taxes. When you add up the numbers, you may not want to finance at all. There is a lot to consider. Good luck!

  4. Reply
    rookem123
    May 19, 2011 at 4:28 am

    Interest only is just throwing your money away – I would definitely not downgrade from a fixed rate mortgage to an interest only. You don’t need to refinance with the same bank – go to other banks and see what they can offer you. Or you could just sell the house.

  5. Reply
    Michael C
    May 19, 2011 at 5:27 am

    You can refinance. Interest only will give you a payment about 20% lower than you are paying now.
    If you may not kep the house forever, consider and I/O arm. for an even lower rate.
    Mike

  6. Reply
    Nancy K
    May 19, 2011 at 5:39 am

    Try using http://Refinance-Today.info to compare refinance rates from the top 4 lenders.

  7. Reply
    GodBlessAmerica
    May 19, 2011 at 6:01 am

    You are looking at it the correct way I would think. You should refinance the home into a 5 year fix interest only and get the interest rate under 6%. I have a friend that I know could get the loan done for you, I am sure. Countrywide has various issues they are dealing with like many lenders do currently. My friend has access to some great programs besides the ones banks use and I know he could help you out. You should shoot him an email. Mike@afbankloans.com
    Good Luck!!

  8. Reply
    sup
    May 19, 2011 at 6:17 am

    not a good idea plus you will have a hard time finding an 80/20 IO these days.

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