I'm a long time reader of the home and garden forums and I know a lot of good advice gets exchanged, so I'm asking for some opinions and advice from you good people. I am sorry this is so long!
We are currently looking into refinancing and I'm having a hard time deciding what to do. This is our first home and our first time refinancing so we are afraid to take the leap and make a decision we might regret.
In lieu of overexplaining why we got such loans and rates in the first place - here is what we currently have:
1st mortgage - 6.75% on a 30-year fixed (balance is $170K)payment is $1182.00
2nd mortgage - 9.00% for 15 years with a balloon payment (balance $44K)payment is $385.00
We want to get rid of the 2nd and get a lower interest rate overall to lower our monthly payments. We do NOT want to cash any out as we have very little equity.
The house was purchased in 2005 for $225K and due to market conditions now, it might be worth $250K if we're lucky. We've made lots of improvements but homes just aren't selling in our area (SW Washington) So....
Our loan to value ratio is roughly 88% - so we're not in an ideal position for refinancing - but we both have excellent credit and very low debt to income ratios - so we feel like we should be able to get a much better deal than this.
One offer we received was for 6.32% with no PMI and only $1150 to close (yes it's a legit offer). So with this we would lower our monthly payment by $196.00 and not add thousands in closing costs onto our mortgage balance. We would also get a $300 Costco card from the deal.
Other offers we got are pretty standard, anywhere from 5.5% - 6% with points of course, and we'd have to pay PMI until our home reaches 80% LTV. With paying points, our closing costs will be on average $4,000+ - which we would be tacking onto the mortgage balance (we don't want to come up with that much cash at closing).
Whew - I apologize, I know this is long!
1. If we take the first offer, which sounds fairly good to us, we would have to refinance again once our home reaches the 80% LTV, this could take a long time, and who knows what interest rates will be by then.
2. If we take on of the other offers, we'd have to pay PMI until our home meets the 80% LTV. Also our closing costs will be much more.
1. Would it be better to pay PMI until we have enough equity, or pay the higher interest rate with no PMI? The payments would be roughly the same either way.
2. Should we just wait and see if interest rates drop further?
And finally, does anyone have any recommendations on banks or lenders that they have had positive experiences with in the past?
A HUGE THANKS to anyone who read this and weighs in!