Post # 1
So Bees…I built a nice little 3bedroom 2 bath house in 2007 and closed that December. My house is nothing extravagant or awe inspiring, but I was very proud of myself that at 25 years old and single, I was able to build my own home. Not only was I proud of that fact, but also that I was able to do it for such a great price at the time. When I closed, my house was appraised for much more than my loan amount, which gave me approximately $40,000 in equity. Well recently I’ve been looking into refinancing since interest rates have significantly gone down. I called my bank and was approved for a rate of 4.5% down from my original 6.35% which would save me about $200/month in my mortgage payment. I was ecstatic at first! Well here comes the kicker…
I had to have the house reappraised for its current market price to go ahead with the refinancing. I knew that my house had lost a lot of it’s value due to the market and was figuring that I was going to be upside down about $30k, but wasn’t too worried about it bc it didn’t matter what the value was, I would still be approved in the refinance. Well, I went to sign the new mortgage today and found out that my house actually appraised for $60k less than what I owe!!! I literally broke down and cried. I don’t even think I’m going to go through with the refinance now either which means that I practically paid for someone to tell me that my house isn’t worth anything The thing is, if I go through with the refinance, it’s going to cost $3500 for the closing costs and then on top of that, they are going to tack on another 5 years to my loan to make it a 30yr fixed again. That means that I will be starting all over paying nothing but interest. As it stands now, after almost $55k in mortgage payments, my actual principle is only down $7k.
I just don’t know what to do! I’m absolutely devastated with the fact that I am completely upside down by $60k in my house. Now I know this wouldn’t be all that bad if we planned to be here forever, but we actually want to move when my FI gets a new job.
If you’re still here reading all of my rambling, I appreciate it! Does anyone else have any ideas or thoughts on what to do about the refinance? Maybe any of my financial guru bees??
Post # 3
Bump? Anyone have any advice they can lend?? Is the refinance really worth it for the short term??
Post # 4
No do not refiance! I am no expert, but throughout business school was constantly told not to refiance unless you HAVE to – or are planning to live there forever!
Sorry you are dealing with this – we are in a similar situation. FI bought the house when he was single and thought he’d live here for a few years then sell. Now it’s lost quite a bit of value and we are ready to move out in the next 2-3 years and are upside down. We are lucky though as we live near a few big universities and may be able to rent it out. Hopefully that’s an option for you! The housing market just sucks right now! Hopefully it will bounce back more soon but I’m not getting my hopes up!
Post # 5
Rates can go up or down but what you have is better than cash it’s a home you can live in. Now is a rubbish time to have to move or sell a house but it won’t always be this way, hold on and you’ll come out of the otherside 🙂
Post # 6
Yeah. We had 30k equity when we bought have lost over 100k in value and are about 70k underwater. We would love to refinance but our mortgage lender is only offering .25 percent off. That isn’t worth the closing costs. So, we are trying to figure out what to do. You could refinance but keep paying the old price, it would get the principal down faster. We need the cheaper payments because i took a new job at a lower salary.
Post # 7
- Wedding: June 2012 - Pippin Hill Farm & Vineyards
I check the MSL weekly to see what neighboring homes are being listed for. That was, there are no surprises.
Bring upside down is very common today. Google that and find some simple artlces to read on SmartMoney.com or other financial websites.
Post # 8
I understand your frustration! FI and I bought a house last summer and had to move unexpectedly for a job opportunity. We originally thought about trying to sell but would have lost money. I definitely would recommend renting your house when it comes time to move! We were able to rent our house for a good bit more than our mortgage payments. We are hoping that the market will improve within the next few years so we can sell it.
Post # 9
Ex Husband and I bought a house for $300,000 in 2006. This year it appraised for $209,000. I feel your pain.
Post # 10
I see you’re in Florida. That is not in your favor since its all over tha florida was hit hard by the housing issue. It’s going to take awhile for everyone to rebuild equity. Just leave your financing as it is. Your still in a better situation than others I’m sure.
Post # 11
@arametta127: I have to disagree with the PPs who advise people to never refinance. It absolutely depends on each situation but I am amazed at how many people out there are currently paying 6% interest on homes they don’t intend to sell in the near term. Full disclosure, I am a CPA and have worked in finance for 20+ years, I have also owned 3 homes in my life, and have refinanced on several occasions and saved a great deal of money doing so.
I am refinancing my home now to a 15 year mortgage, and will save $6,000/year in interest and cut 7 years off my mortgage in doing so, which obviously makes the closing costs well worth it. That said, my home has also decreased in value and I will have to increase the equity in my home to get the rate I want. It stinks, but that money is going to my equity, and I can take the money out of savings without causing hardship, so I’m going forward with it.
In your case, assuming the appraised value is accurate, you’d need to come up with $60,000 to sell the home, so assuming you don’t have to move right now you may want to sit tight and hope that home values creep up. However, you may be able to refinance under the HARP 2.0 program even though your mortgage is underwater – you should definitely look into it. If you can lower your rate and start paying that extra $200/month toward your principal you can bring up your equity faster and at the same time take years off of your mortgage. Good luck!
Post # 12
I agree with PP who mentioned HARP or another government program for homeowners underwater. One of our neighbors did this and it’s saving them a ton of money and worry – they really thought they were going to have to walk away from their house.
The housing market where I live is improving. We bought our house in 2010 as a foreclosure…the folks who bought it in 2007 paid $160,000 more than we did – holy crap!
Post # 13
I wanted to thank everyone for their input! If anyone was wondering, I went ahead and completed the refinance. It’s a HARP loan and I’ll be saving around $200/month. I decided that I could put that extra money each month to my credit card debt and get that paid off in about a year since it has such high interest. I figured once that’s paid off, I could put that money back towards the principle of the house. Either way we figured that with the refinance, we would be able to pay down some higher interest things and it would be easier to rent out when we move. Again, thank you for taking the time to read my long, rambling post, as well as comment 🙂