what do i do about my adjustable rate mortgage?

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i owe $ 500,000 on my home. i currently have 2 mortgages. 1 for $ 400,000 and another for $ 100,000. the larger amount is at 5.8%, the smaller loan is for 8.5%. my monthly payment is almost $ 3,000. my home is a 2 family and i have a rental income of $ 1,500 monthly. my 5.8% rate is going to adjust in a year. my home was recently appraised at $ 750,000. i am also a disabled veteran and i haven’t used my VA loan. is there anything i can do before i get caught up in the sub-prime debacle? before anyone chastises me for purchasing a home i couldn’t afford, i earn $ 90,000 a year. my monthly income after taxes is 5,200 a month. i can afford the home, i just want to protect myself and possibly lower, if not maintain my current payment.

  1. Reply
    Paul C
    February 15, 2011 at 4:34 am

    As a mortgage lender, I would look at two different scenarios.

    1. Only refinancing the 1st. That would keep you in a conforming loan. (anything under 417,000) and I would subordinate the 2nd mortgage.

    2. I would look at combining both mortgages at 600k (jumbo) and compare it to the first scenario.

    I would look at these 2 different options because Jumbo Interest rates are different (higher)than conforming rates. Then depending on how long you’re planning on staying in the home advise accordingly.

  2. Reply
    E L
    February 15, 2011 at 5:31 am

    First of all, let me commend you for addressing this issue early. Far too many people wait until it’s too late to make a change. Secondly, you certainly want to explore your mortgage options. Of course, there will be several factors that will have to be taken into consideration when refinancing your existing loans i.e. debt load, payment history, credit rating, etc. Hopefully, you’ve been able to hold things together fairly well. I recommend you visit http://www.StephLoveTV dot com. He comes highly recommended and will be able to answer more questions or point you in the right direction. Best of luck to you.

  3. Reply
    saeed q
    February 15, 2011 at 6:09 am

    If you have a good credit rating with not too much outstanding credit, you should be able to combine you first and second loan into one and refinance into a fixed rate loan. Based on your recent appraisal of $ 750,000 and your combined outstanding loan amount of $ 500,000 you should have no problem getting a rate between the high 5’s and the low 6’s right now. Keep in mind that there is a lot more that determines what rate you get and the rates I mentioned are pretty much for an ideal scenario “cherry” as some would say. Now the question of to refi or not right now, I would have to say “REFI NOW”. Looking at where the market is at right now and with no foreseeable turnaround in the near future, it would probably be safe to say that your property value maybe lower in a year, meaning you will have a higher loan to value ratio which may translate into a higher interest rate. I don’t know where you live but you should also keep in mind that most banks are now deducting 5% of the appraised value due to declining home values, depending on what region, state, or city that you are in. This fact alone should tell you that they expect values to fall even more. Hope this helped a little.

    A lot people giving advice are also looking to give you a loan, if they are not local to you and you can’t get to them within 1 hour don’t fall for it. They say they are licensed in all 50 states, what does that mean? Which state do you have to look in first if something goes wrong? KEEP IT LOCAL!

    Remember Buddha’s advice:
    “Believe nothing, no matter where you read it or who has said it, not even if I have said it, unless it agrees with your own reason and your own common sense.” You are the only “expert” you can trust: All brokers, and every other loan officer guru giving advice here with a .com or contact me at the end is “selling” you something. Don’t buy “it.”

  4. Reply
    Mary B
    February 15, 2011 at 6:18 am

    I’ll be honest with you…even on your income, that is extremely tight, as more than 50% of your monthly take-home income is going toward the house payment…that is never a good ratio.

    This is what I would recommend that you do:

    You have more than enough equity to refinance for an 80% LTV without paying PMI.

    I would make sure that you get a deal, where both mortgages would be paid off at a minimum of 5.8% or less interest.

    On a jumbo loan with excellent credit, you should easily be able to make that happen.

    Here is where you get smart…make SURE that the TERM that you refinance for is LESS than 30 years so your payments don’t “start over”. Let’s say you have been paying on your mortgage for 4 years…when you refi, get a 25 year term, and so on.

    Then to be even SMARTER…I would continue to pay the $ 3,000 that you are already used to paying, on the new loan, that way the difference each month goes towards principle and you pay down the loan even faster.

    PS: On loans that size, good income, and excellent credit, the first thing I would do is call the mortgage company that holds your FIRST mortgage and see if they would be interested in rolling that second into the first with the current term…that way all you have to do is pay a closing fee and record a new note. They won’t always do it like that, but it doesn’t hurt to ask.

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