i have 5/1 arm expiring in oct.10. owe 186k in primary and 26k secondary. together?

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i owe 215k to my bank. my home value is between 220k to 230k. i bought it for 250k 4 years back. my question is if i’m not allowed to refinance or neither underwater to use govt. plan. what are my best options to avoid the “prime plus” after oct. 10.

can i refinance again a ARM with the primary and secondary mortgages?

how do you qualify for loan modification? my monthly payment is 1850(primary and sec(int only)) when my monthly income is 4400 after tax. and my loan is owned by fannie mae?

thanks

1 Comment
  1. Reply
    Lauren F
    May 3, 2011 at 8:13 pm

    It is good that you are thinking so far in advance.

    One thing to consider before spending high fees to refinance is how much at risk you are on the ARM expiration. For example, prime right now is at a 40 year low, so it’s possible that your payment wouldn’t go up at all (or only a little) if you just go to the adjustable. Know the math before you rush to refinance.

    Also, look at the adjustable levers on your account – that is, if it does adjust, how much can it adjust at one time. If the most it can adjust is 1%, and it does in fact go up by 1%, then that translates to about $ 180 a month in a higher payment. Certainly a hardship, but maybe cheaper than going for a full refinancing.

    Also, you want to consider how long you will be staying at this house. The costs to refi a $ 230,000 house will be around $ 6,000 – $ 8,000 depending on whether fees, points, etc. are involved. If you think you will sell or move within 4 years, you may be better off paying the higher interest rate, because the increased payment over that 4 years will still be less than the cost of refinancing. In the end, you will walk away with more money.

    Talk with your existing mortgage bank and find out if they have a mortgage conversion option where they will allow you to conver this existing ARM loan to a fixed rate loan. Since they see your good payment history, they might be willing to do this for you at lower cost than other banks.

    If you are comfortable taking another adjustable mortgage, then ING bank has some very good deals right now. They have one where your rate is fixed at 3.875% for the first five years, with a renewal option at the end of the five years. That one is only good for 75% loan to value, but if you can refi your second mortgage, or come up with a higher appraised value on your house along with some cash to the table to pay off some of the loan, it could be a great deal for you. See this link for details of their program:

    http://home.ingdirect.com/products/products.asp?s=RatesandClosingCost

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