Refinancing advice needed (esp. mortgage professionals) what is the best course of action?

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My husband and I bought our home a little over two years ago with 80/20 financing. 1st mortgage rate is 7%, 2nd is about 9 or 10%. We don’t have much equity in our home because of the present market, 5% possibly. We really want to snowball our debt and eliminate 2nd mortgage entirely and get a 15year loan. What makes the most financial sense?

1) Refi now into one low-rate fixed loan (either 15,20, or 30yr) We would have to pay PMI on top of that because we don’t have 20% equity.
2) Snowball debt including 2nd mortgage and don’t rush to refi.

My friend did a stupid thing she racked up 20,000 dollars of credit card debt she then took out a refinancing loan on her mortgage for 10,000 she could have taken 20,000 but only took 10,000 so now she is stuck owing 10,000 in credit card debt on top of a refinancing loan. I told her she was crazy she should have negotiated with the credit card co. and consolidated her debt and got a lower interest rate on one card and pay that off. Now she is working two jobs to pay off her debt and has put her house in jeopardy if anything should happen to her. Can anyone help figure out what she should do. thank you P.S. now the bank will not give her more on the loan till it’s paid up. Can she negotiate with the credit card co. her credit is still good she is making payments.

  1. Reply
    Spock (rhp)
    February 10, 2011 at 8:01 pm

    where? Dallas, very small chance. Sacramento — no prayer.

    in the present market, I very much doubt that any firm will want this deal. expect maybe your second mortgage lender — if that’s a bank or mortgage company and not a person.

  2. Reply
    Becky D
    February 10, 2011 at 8:25 pm

    If it were me I would refi now, even tho you will have the PMI once you reach 80% LTV, you can remove the PMI just keep track they will not inform you. The reason that I say refi is that the other debt you do have I bet you are paying a lot more in interest than the PMI will be. Take a 30yr fixed with no prepayment penalty.

  3. Reply
    February 10, 2011 at 9:22 pm

    If you have enough monthly income to be able to afford the payments on a 15yr loan for all your debt, then you certainly have enough monthly income to pay off the 2nd quickly without refinancing. You left out info about any other debts you may have besides the mortgage, but if you have any, considering that you can’t even refi without PMI (nondeductible) I would recommend using your solid income to pay off all the other debt (with nondeductible interest, assuming it is at a net-after-tax rate greater than 10%) first, and then pay down the 2nd as fast as possible. If your income isn’t substantial enough to do that, then it’s probably not substantial enough to make ratios on a 15-year loan for all of your debt combined, or at least not to get a good enough rate on that loan to make sense to refinance.

    You may still want to get rates for this loan from a lender and run the numbers, but be up front with them that this is a 95%+ LTV loan as I suspect most can’t do it or can’t give you a decent rate, plus you have to estimate the PMI on top of that.

  4. Reply
    February 10, 2011 at 9:42 pm

    yes often the credit cards company will freeze the rate for you and help you to pay them off.

  5. Reply
    February 10, 2011 at 10:24 pm

    She can go to another consolidation company and consolidate the 2 bills she has with a lower interest rate. Or she can just quit one of her jobs so she has a lower income and file bankruptcy.

  6. Reply
    February 10, 2011 at 11:05 pm

    Find in yellow book credit bureau for help your Credit solution or Free from Dept. Or simply file a bankruptcy and lose your credit for 10 years or so.

  7. Reply
    February 10, 2011 at 11:18 pm

    Your friend is lucky to have a friend with sense like you.
    I presume that where you are you get paid by direct debit to a bank account. Tell you friend that with one job put ALL the pay into the Credit card to pay that off first, it will have the highest interest rate.
    If possible, if the other employer will allow payment to more than one A/C, she should direct debit the mortgage payment every pay day, (more frequent payments will also lower the amount to be repaid.)
    then live off the rest, putting extra off the credit card if she can save anything.
    She must make NO MORE purchases on the credit card until the card is paid off, then CUT IT UP!

  8. Reply
    Stacie W
    February 11, 2011 at 12:14 am

    Try Debt I did and it worked!

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