Mortgage refinance option 1 or 2?

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I want to refinance my mortgage. My setup is I have an 80/20 loan with 1st mortgage being 161,000.00 @ 7.85 adjustable and 2nd being 40,000 @12.125 fixed, both for 30 years. Its been 2 years and I originally bought the home for 205,000. My first option is refinance the whole thing at 6.25% and lower my payment by about $ 200. The other option is only refinance the 1st and try to pay off the 2nd in about 5-7 years. What would be betterrr?

  1. Reply
    May 3, 2011 at 12:37 am

    As much of the loan balance as you can get down is the best option because as we all know most of today’s housing values are rapidly decreasing. If you can pay off the 2nd and not strap yourself I would say refinance the 1st and since the 2nd is fixed anyway. Depending on your state I can refer you to someone if you’d like to speak with someone.

  2. Reply
    May 3, 2011 at 12:44 am

    The first option is definitely the way to go. Put it to yourself this way: would you rather keep paying an interest rate of 12.125% on the $ 40,000 amount of the second for the next 5-7 years? At the end of 5 years, you will have paid almost $ 25,000 and still owe almost $ 38,000 on that portion of your debt, as compared to paying about $ 15,000 on that portion and owing only a little more than $ 36,000.

  3. Reply
    Casey C
    May 3, 2011 at 1:09 am

    The key is to find out the average interest rate.

  4. Reply
    Lisa L
    May 3, 2011 at 2:03 am

    No one asked how much equity you have. Two years isn’t much time to have built up much equity on a 100% loan. (Actually your numbers don’t add up) You must be at a maximum 97% LTV & your PMI factor will be very high. If you refi the first only, the company holding the second will have to agree to subordinate.

    Have a loan officer work up some scenarios for you. It will be subjective until you get an appraisal, but it will give you an idea. Lender paid PMI is an option but for a refi your LTV will have to be 90% & credit score above 700.

  5. Reply
    Gary H
    May 3, 2011 at 2:35 am

    It all depends on ratios, appraisals, and income. Have a loan officer work up some scenarios for you, and shop around. Not all loan offers are the same, and you’d be surprised what’s available, even now.

    Check out Loan-Com .info and do a search for refinance loans. They have dozens of loan programs available at reasonable rates and affordable terms.

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