Tuesday, October 4, 2011

A break in the updates to ask for your help!

I have a dilemma....

I sent an email to my favorite mortgage broker a couple of weeks ago. Ended up being able to lock in a 3.875% fixed rate (30 years) for a refi of the primary mortgage. Based on the assumption that I'd refi $246,000, it would drop the payment $140/month. Less cash each month, less interest the bank earns in the long run (even with the extra payments since I'm already 30 payments into this current mortgage). The closing costs are approximately $1,200 so it would take less than one year to re-coup my costs.

Bad news....we got a really crappy appraisal. He pulled 3 comps from a street I would never consider living on since it backs up to the interstate. We actually looked at houses on that street a few years ago, but the constant drone of the tractor trailers would have seriously put me over the edge. The appraiser won't reconsider.

So now...if I want to proceed, I'll have to bring about $9,500 to the closing table. I could pull it from the HELOC --- at a 2.75% variable rate. To refresh your memory, the HELOC is secured by the rental property. I could try to work out some kind of plan that would not only pay off this extra $9,500 but also increase my monthly cash flow. The new reduced loan amount would drop my current payment by $187 instead of $140.

What to do? What to do? Any opinions?


  1. If there is an overall saving I would go ahead, but are their any tax implications with the HELOC on the rental? (might be different to what we do in AUS)

    we are about to get our house valued and prices in our street have dropped about about $30,000 from five years ago :(

  2. I don't want you to think no one looked at this. Mr. 444 looked at it but couldn't come up with a good answer. Then again, he has cars on the brain right now, so I think he's spending all his time calculating payments and trade-ins.

  3. That is alot of money to bring to the table. If you can pull it from HELOC, and have a way of paying it back in a timely manner (a year? 18 months?), and you are sure this is the right decision, then do it.

    We did a refi in January, and we had to bring money to the table. In the end, our mortgage hasn't really gone down, despite going from 7.5% to 5.125%. Our escrow killed it. We are now paying more in escrow because of things going up, and they "forgot" a bill when they estimated the escrow. So our current mortgage is less than $100 from where we were.