Let's talk about loans, mortgages, and refinancing at lower interest rates!!

[Larry_OHF]

I wanted to share what I have been doing the past few days, and see what you all thought about it. Hopefully, my thread will be used by somebody as new to the world of economics as I am, and can benefit from it.

We bought our home for $71,000 dollars over a year ago, closing at 96%, and locking in at 8% interest on a basic 30 year loan.
Now that the interest rates are down to like 5%-6%, we wanted to refinance. Yet, even with a high beacon score and beautiful credit, we did not have enough equity in the home to have dropped below the 5% LTV cut-off. Then my oil furnace is discovered to have a cracked fire-box...(Conan, I need some advice on this one...).

Well, I remembered that I own 6 acres of forest land in Lenoir, NC and decided that I would take out a land loan. I went to Centura bank, because they seemed to be the only ones out of a group of banks called that were helpful enough to impress us. The loan I am getting tommorow is a 4 year loan of 60% of the value of the land. That comes to be me receiving $14,300 cash tommorrow. It is to be treated as a 15 year loan, until the end of four years. I make a monthly payment of $110.00/mo. The interest rate is 7.6%.

What I intend on doing with this money is :
#1) Pay off debts and bills, totalling 9,500,00. This includes credit loans that have interest rates higher than the consolodation loan I will put them into.
#2) Make home improvements(Conan...again), such as retiling kitchen and bath and finishing some other cosmetic needs of the home, thus raising it's appraisal value. A higher appraisal value means I can sell the house for more than I payed for it. I already estimate that I have $10,000 coming easily. This house is at least worth $80,000.
#3) Left-over money after that should be between $2,000 and $3,000 that I need to fix the furnace, open a secured savings account for the baby, put a couple hundred back for Christmas, and other emergency needs.

Then, we will set down with a bank and refinance the home, but instead of a 30 year mortgage...we will probably do what is termed as a 5/1 ARM. That is that for five years...we will be locked in a 5.6% interest...and after five years, the interest rate will go up at 2%/year, unless the national rates are not up that high. Then, it can only go up to a total of 6% of the original 5.6%. Yet, we do not plan on living here for more than five years, so what do we care if they go higher after five years?!

Of course...with the lower interest rate, my mortgage/mo. will be dropped by $150...and more principle is being payed and less interest wasted. So when we do sell the house...after paying the bank the outstanding balance, we will have more return cash! (insert jumping, happy man here).

With the extra cash per month, I can pay the land loan off early, and not worry about not having finished by the end of four years.

SO...what do you guys have to say???

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3rd Member of the Ancient OHF
Diamond Ranger of the ALSB (secretarial position & Ambassador)
Father of the wicked but cute child known as MaryBeth

Padre de una niña bien traviosa pero guapa
---------------------
Aisukuríimu ga tabetái desu.

[Prime2U]

I say that's excellent Larry! sound financial planning. Looking back, I wish I would have bout a house when I came to college, after 8 years I would have had a significant amount paid off, with roommates paying the bill. Then I could have rented it out to make the house payment plus a couple hundred profit a month, which would have taken care of any maintenance at the least, and after the house was paid off I would have had a steady source of income. Or I could have just turned around and sold it after school was done and had a nice chunk of cash to start out on. But oh well, I was only 18 then and new to the world, and the fraternity was fun anyways


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"Life is what happens while you are busy making other plans." - Lennon

[Hiram Sedai]

Larry, the good news is that I do work at a Mortgage Company. The bad news is that I'm the mailroom supervisor and cannot give advice. sorry

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"I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant."
-Robert McCloskey

• Token lackwit of HADB
  
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• Jeg burde blive gennembanket for min flatulens.[/list]

[250]

I don't know, ask Moridin, he is expert in this. but my opinion... ackk, it doesnt matter, does it?

[Larry_OHF]

Originally posted by Hiram Sedai: Larry, the good news is that I do work at a Mortgage Company. The bad news is that I'm the mailroom supervisor and cannot give advice. sorry

Lol!!
Well, I am working at Triad Guarantee Insurance, which is a mortgage insurance company ...in the mailroom!



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3rd Member of the Ancient OHF
Diamond Ranger of the ALSB (secretarial position & Ambassador)
Father of the wicked but cute child known as MaryBeth

Padre de una niña bien traviosa pero guapa
---------------------
Aisukuríimu ga tabetái desu.

[J.J.]

Originally posted by Larry_OHF: I wanted to share what I have been doing the past few days, and see what you all thought about it. Hopefully, my thread will be used by somebody as new to the world of economics as I am, and can benefit from it. We bought our home for $71,000 dollars over a year ago, closing at 96%, and locking in at 8% interest on a basic 30 year loan. Now that the interest rates are down to like 5%-6%, we wanted to refinance. Yet, even with a high beacon score and beautiful credit, we did not have enough equity in the home to have dropped below the 5% LTV cut-off. Then my oil furnace is discovered to have a cracked fire-box...(Conan, I need some advice on this one...). Well, I remembered that I own 6 acres of forest land in Lenoir, NC and decided that I would take out a land loan. I went to Centura bank, because they seemed to be the only ones out of a group of banks called that were helpful enough to impress us. The loan I am getting tommorow is a 4 year loan of 60% of the value of the land. That comes to be me receiving $14,300 cash tommorrow. It is to be treated as a 15 year loan, until the end of four years. I make a monthly payment of $110.00/mo. The interest rate is 7.6%. Larry, some basic q's about your credit - if your beacon is above 700, you are gold anywhere - you should not pay more than a half point above prime on a note for any fully owned asset. If it is between 675-700, 3/4 pts. above prime. 675-650, a full point.650-630, point and a half to two. now, below 650, that is the point at which your debt/income ratio starts affecting your rate.30% or less, helps.30-35%, doesn't hurt 35-40% - may add a quarter to half. 40-45% could be a full point, and generally you can't do squat if you are above 45% w/o the extra equity in the refinanced property. a beacon of 625 or less-never less than 600, though, generally requires a debt load under 40%, and you will get tagged for at least 2 extra points on top of everything else. a beacon of under 600 means you are a 'mooch' -fuh-gettabowtit! with what you ahve said about your credit, the rate on the land loan seems a bit much, depending on the % of equity you have in the land? What I intend on doing with this money is : #1) Pay off debts and bills, totalling 9,500,00. This includes credit loans that have interest rates higher than the consolodation loan I will put them into. #2) Make home improvements(Conan...again), such as retiling kitchen and bath and finishing some other cosmetic needs of the home, thus raising it's appraisal value. A higher appraisal value means I can sell the house for more than I payed for it. I already estimate that I have $10,000 coming easily. This house is at least worth $80,000. Does your house have a garage already? - that is the fastest way to add equity if not. don't know about down there, but here you can buy a garage package, with trusses and fasteners, 24x24, for about 2800$ get your dirt work and monument slab for about 1800$ - as the home owner, you can do your own electrical work and panel - call it another 1000$ for 200amp panel, switches, wires, fixtures, and heater(s) with just the basic garage, you double your equity vs. investment - that 6k$ garage will add a minimum 10, max 13k to your house value. a much cheaper way to get another 1-1.5k equity, paint it! inside and out, paint, plastic, tape, rollers, brushes, etc. not more than 300-400$, as long as you do it yourself. pretty good R.O.I. for both. - should be as much gain as your retiling, with less $ into it. #3) Left-over money after that should be between $2,000 and $3,000 that I need to fix the furnace, open a secured savings account for the baby, put a couple hundred back for Christmas, and other emergency needs. Then, we will set down with a bank and refinance the home, but instead of a 30 year mortgage...we will probably do what is termed as a 5/1 ARM. That is that for five years...we will be locked in a 5.6% interest...and after five years, the interest rate will go up at 2%/year, unless the national rates are not up that high. Then, it can only go up to a total of 6% of the original 5.6%. Yet, we do not plan on living here for more than five years, so what do we care if they go higher after five years?! Does this mean that the max rate could be 11.6%, unless inflation hits and the prime rate goes higher? - if you end up staying, very costly are there refinancing/early termination penalties? if you end up staying after 5 yrs, but rates are still low, so you refinance the balance with another loan - can they soak you with fees if you do? - how did the rate look on a 15yr fixed? a little bigger payment, but your equity accelerates at a terrific rate! as far as the furnace, do you have any other choice besides oil burner? gas utilities often have low-to-no interest rates when upgrading to a more efficient gas furnace - as long as you can get hooked up,that is. Of course...with the lower interest rate, my mortgage/mo. will be dropped by $150...and more principle is being payed and less interest wasted. So when we do sell the house...after paying the bank the outstanding balance, we will have more return cash! (insert jumping, happy man here). With the extra cash per month, I can pay the land loan off early, and not worry about not having finished by the end of four years. what happens after 4 yrs if you can't get the land loan paid? SO...what do you guys have to say???

you have obviously been doing your *ahem* homework lol. i hope that i did not just cover ground you have already been over, and something there was at least partly useful


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Amanda's Dad-Best Damn Job, Period.

Official Pin-Up Girl Massager of the O.L.D. C.O.O.T.S. Clan
To Err is Human To Forgive Divine, However Neither is U.S. Marine Corps Policy.

[This message has been edited by J.J. (edited 10-25-2001).]

[This message has been edited by J.J. (edited 10-25-2001).]

[J.J.]

bump in the night

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Amanda's Dad-Best Damn Job, Period.

Official Pin-Up Girl Massager of the O.L.D. C.O.O.T.S. Clan
To Err is Human To Forgive Divine, However Neither is U.S. Marine Corps Policy.

[Larry_OHF]

Wow! J.J...
Thanks for taking the time to help a brotha out!
I was not aware that I could be told what my beacon score was, but I was only told that I had outstanding credit and very pretty figures. I will look into this.

The house has a 1-car carport, but I realized this morning that I need to ground wire my house, as it was not a requirement back in the 50's, and the previous owners never upgraded. I need to to that, and I figure it won't cost much for a little wire, right???

As far as the loan time and all, I am still considering a 15 yr. loan, though I have many of the executives here at work telling me of shortcuts around this or that, and the advantages of this and that, based on my proposed future of not living in this home for more than 5 yrs.
The oil furnace is not wanted by me. I would prefer as, but the hook up cost to the city line is $1200.00 because of the amount of line needing to be laid toward my house, pluse a $3200.00 furnace. The propane tank methode is roughly $2000.00, and that looks to be the best idea, but I had new oil line hook-ups placed before I knew of my oil furnace problem, and I may be able to just buy the parts to the furnace and insert them myself, which would cost only $300.00, as opposed to a $2400.00 new furnace.

I promise to keep everyone posted on this...and hopefully, the information accumulated in this thread will help more people.

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3rd Member of the Ancient OHF
Diamond Ranger of the ALSB (secretarial position & Ambassador)
Father of the wicked but cute child known as MaryBeth

Padre de una niña bien traviosa pero guapa
---------------------
Aisukuríimu ga tabetái desu.

[Epona]

Wow, can't add much about the finanaces as I'm not very knowledgeable about that end of things.

The advice I would give is this (based on my experience of house selling in the UK):

If you are looking to sell your house, make sure that any work you spend money doing will actually add to the value. Ground wiring is a must. BUT: Tiling the kitchen and other cosmetic work is unlikely to add any value to your home, although it would make it easier to sell if it looks nicer. So don't spend a fortune on purely cosmetic stuff because you might not make back what you spend - investigate what improvements would actually add significant value before embarking on any projects. Upgrading your central heating for example may add to the value.

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Time is an illusion. Lunchtime doubly so.

Epona of The Laughing Hyenas
Proud winner of the 'Most Useless Post 250 Has Ever Seen' Award 2001. "I'd just like to thank my friends and family, without whom none of this would have been possible..."

[Larry_OHF]

You're right, Epona, yet in this case...the dining room has an old stained carpet, and I believe that that ripping that carpet up and putting down tile will be a major improvement. One should not have a carpet in the room that one feeds a 1 1/2 yr. old child every day.... Other minor tasks are painting the computer room, and putting closet doors on the closets...as they do not currently have any.

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3rd Member of the Ancient OHF
Diamond Ranger of the ALSB (secretarial position & Ambassador)
Father of the wicked but cute child known as MaryBeth

Padre de una niña bien traviosa pero guapa
---------------------
Aisukuríimu ga tabetái desu.