Refinance small condo loan?

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Refinance small condo loan?

Postby Gardener » Wed May 08, 2013 6:44 pm

Would it be advisable for my mother in law to refinance her small mortgage? If so, is there a particular institution that I should check out with her? Any guidance or advice would be appreciated.

Heres the background on my mother - in - law's current mortgage and her overall finances:

Property Location: Arizona
Her Income: 35k
Condo worth: Approximately 75k
Mortgage balance: 45k, 21 years remaining on a 30 year loan
Current interest rate: 6%
Lender: Chase
Credit: ?, if I had to guess, her credit is probably above average
Status: Owner Occupied
Future Plans: Will likely hold on to this condo for 10+ years
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Re: Refinance small condo loan?

Postby JDaniels » Wed May 08, 2013 7:02 pm

I would certainly refinance. Not only would she get a rate about half of what she is paying now, she could cut 6 years off by choosing a 15 year term. It would still probably be a cheaper monthly payment as well.

Try bankrate.com for comparisons in your area.

Good luck!
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Re: Refinance small condo loan?

Postby Snow Boarder » Wed May 08, 2013 7:57 pm

It is tough to find places to refi small principal loans. The minimum Amerisave.com will refi is $50,000. But I came up with a creative solution for you.

If you do a cash out refi for $50,000 (taking out 5k in equity) you can get this 15 yr loan:
$50,000 for 15 year @ 3.375% with APR 3.957% and ~$1,251 closing costs. New Payment = $354.38
http://www.amerisave.com/closing-cost-d ... tsOption=0

Using the mortgage calculator from bank rate.com I estimated your MIL current P&I payment at $314.49.
Amortize $45k @ 6% over the 21 year remaining period = $314.49. The TOTAL interest paid on current will be $34,250.

Now take $5k from cash out and paydown principal immediately (don't buy new furniture etc) which reduces the term in years to 13year loan paying a TOTAL interest of $10,770. That pays off your MIL 8 years faster and saves her $23,480 in interest payments. Factoring in the closing costs it is still a savings of $22,229.

The payment is ~$40 more per month BUT that is on the assumed current $314 PI (45k @65 over 21yr). At the time the 30 loan was originated her payment was higher then $314 so the mothly increament will be less then $40 but that is all I had to go on.

Hope this helps....
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Re: Refinance small condo loan?

Postby tfb » Wed May 08, 2013 8:47 pm

Gardener wrote:Would it be advisable for my mother in law to refinance her small mortgage? If so, is there a particular institution that I should check out with her?

It will be hard to justify the closing cost on such a small loan. The loan Snow Boarder found is 15-year at 3.375% with $1,251 in closing cost whereas the going rate for a larger loan is 15-year at 2.5% with no closing cost. Her better bet would be a variable rate 5/5 ARM from PenFed at 2.5% with no closing cost. If the rate goes up by a lot after 5 years, just pay it off.
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Re: Refinance small condo loan?

Postby Watty » Wed May 08, 2013 10:06 pm

One thing she should do is call her current lender to see if they have any special refinance programs. Often they will just try to give existing customers a junky offer since some people will take it because it is easier than doing some research so you have to be careful and get all the details but sometimes they will have good programs.

One of the things that I would do is to check with a local credit union to see if she could get a home equity loan instead of a traditional refinanced mortgage since the costs may be much lower and they may not even require a full formal appraisal.

PenFed has home equity loans so you might check them out.
https://www.penfed.org/home-equity-loan/
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Re: Refinance small condo loan?

Postby MathWizard » Thu May 09, 2013 11:34 am

I just refinanced a 15 year loan with a $45K balance (7 years left) at 4.875% to a no-cost
7 year Home Equity Loan at 3.875% at a local Credit Union. It dropped my payments, and
added nothing to the loan.

I tried for a 2.75% fixed but they upped it to 2.875% for the small balance and wanted
$1600 in closing costs. The 3.875% seemed like a better deal.

I had considered PenFed's 5year HEL at 1.99% , but dealing locally and staying at the 7 year
payoff seemed like a better deal. (I'll have 2 kids in college this fall.)
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Re: Refinance small condo loan?

Postby Gardener » Fri May 10, 2013 6:04 am

Folks,

Thanks so much for your input. I read through all of your responses, but have printed this thread out so I can analyze more in depth the different types of options you provided. Before I posted, I was leaning towards trying to get something done with PenFed 5/5Arm. Now, it seems this might be a good option, but glad to see other options exist. I will post an update and let you know what we did.

Thanks.

Gregg
Hampstead, MD
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