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Started By
Message
Refinance Question
Posted on 5/31/17 at 10:00 am
Posted on 5/31/17 at 10:00 am
First the Facts: House/Property/Financial
I purchased a shop house/barndominium, sitting on two acres last summer in South Sulphur (Carlyss). It was originally built in 2013. The total square footage of the barndo was 70x40. Inside was a one bedroom, one bath, living room, and a fully functioning kitchen. The living quarters only took up about 1,000 square feet leaving around 1,800 square foot of shop.
Since purchasing the barndo, I have added on an additional 1,400 square foot of living. Master bedroom, master bath, additional bedroom, utility room, and a office. Along with additional living quarters, I added a concrete three car-carport and concrete covered front porch all made of metal. I also filed permits and completed all inspections with the Police Jury to convert the barndo (originally it was classified as an Accessory Building) to a residential house. It is now classified as a 3/2 bath house.
I paid $150,000 for the barndo/two acres last summer. I currently owe around $128,000 (mortgage is with Sabine State Bank.) I paid cash for all my additions that I have made over the past year and I have no home equity loans or additional mortgages. During the purchase process, the home was appraised for $175,000 (that was before I made improvements.) I haven't had it appraised since improvements.
The Carlyss area is a fast growing-popular area largely due to the industrial boom in Southwest Louisiana.
Question:
Would it be a good idea to refinance? My current interest rate is fairly high...6%. I'm comfortable with the current monthly note but I'm looking to get a better interest rate. Also, certain banks and mortgage lenders don't finance metal structural house's. Just looking for a little advice.
Thanks!
I purchased a shop house/barndominium, sitting on two acres last summer in South Sulphur (Carlyss). It was originally built in 2013. The total square footage of the barndo was 70x40. Inside was a one bedroom, one bath, living room, and a fully functioning kitchen. The living quarters only took up about 1,000 square feet leaving around 1,800 square foot of shop.
Since purchasing the barndo, I have added on an additional 1,400 square foot of living. Master bedroom, master bath, additional bedroom, utility room, and a office. Along with additional living quarters, I added a concrete three car-carport and concrete covered front porch all made of metal. I also filed permits and completed all inspections with the Police Jury to convert the barndo (originally it was classified as an Accessory Building) to a residential house. It is now classified as a 3/2 bath house.
I paid $150,000 for the barndo/two acres last summer. I currently owe around $128,000 (mortgage is with Sabine State Bank.) I paid cash for all my additions that I have made over the past year and I have no home equity loans or additional mortgages. During the purchase process, the home was appraised for $175,000 (that was before I made improvements.) I haven't had it appraised since improvements.
The Carlyss area is a fast growing-popular area largely due to the industrial boom in Southwest Louisiana.
Question:
Would it be a good idea to refinance? My current interest rate is fairly high...6%. I'm comfortable with the current monthly note but I'm looking to get a better interest rate. Also, certain banks and mortgage lenders don't finance metal structural house's. Just looking for a little advice.
Thanks!
3
Posted on 5/31/17 at 10:11 am to HANSENBREATH
Depends on how long you plan to be there. Is this your long term house or you plan to sell in the near future? If you plan to sell them don't. Good rule of thumb on refinancing is only do it if you can save at least 2 percent on interest and if you plan to be there long term.
Posted on 5/31/17 at 10:16 am to GeauxTigers1983
Thanks for your reply. Yes, I do plan on living there for at least the next 10 years if not longer.
Posted on 5/31/17 at 3:13 pm to GeauxTigers1983
2% seems like a crazy high number. I refinanced to save a little over 1% in interest and my mortgage dropped around $450 per month (although $150 of that was from PMI coming off the house). Also, rates are around 4% right now, which almost gets him to the 2% level.
Posted on 5/31/17 at 3:16 pm to HANSENBREATH
I have nothing to add except this: thanks for introducing me to the world "Barndominimum"......
Posted on 5/31/17 at 3:25 pm to GeauxTigers1983
quote:
GeauxTigers1983
quote:
Good rule of thumb on refinancing is only do it if you can save at least 2 percent on interest and if you plan to be there long term.
That's not a good rule of thumb at all.
30 year paper @ 6% interest = $1,049.21/month PI (No Taxes or Insurance included in this amount; YMMV but we're only comparing principal and interest as escrows will be static regardless of the PI)
(ETA: Example was run on $175K loan amount)
30 year paper @ 5% interest = $939.00/month PI.
You mean to tell me that saving 10%+/month isn't worth it? Based on this scenario that adds up to cutting an entire house-note off his annual expenditures for his housing and that is absolutely worth it regardless of how you slice it.
The cost to recoup is immaterial as he owes way, way less than 75% LTV (Looks like it's less than 65% LTV to be honest).
If he could get to 4% (which paying down using discount points that's totally plausible in the current market based on what I'm seeing at the closing table) that's over $200/month which is $2,500+/year.
Either way you slice there are tangible savings to be had by reducing his rate in this scenario by 100 basis points.
To reiterate: 2% is not a good rule of thumb. 50% of that can still provide dramatic savings monthly, annually and over the life of the loan.
This post was edited on 5/31/17 at 3:56 pm
Posted on 5/31/17 at 3:48 pm to HANSENBREATH
your barndominium is going to be a problem. Sabine sate stuck you with a high interest rate because they could get the loan done. there more than likely isn't comps that support the home and that will be a problem on a conventional refinance. I turn people down monthly who want to build bardonminium's because i know the appraisal will not work out well.
Posted on 5/31/17 at 3:54 pm to GFunk
G-FUNK...solid post. I appreciate it!
HAWKEYE...do you have a lender you recommend them too?
HAWKEYE...do you have a lender you recommend them too?
Posted on 5/31/17 at 4:02 pm to hawkeye007
quote:
hawkeye007
quote:
more than likely isn't comps that support the home
I disagree. It's more of a challenge I agree with you there.
But with challenge comes opportunity. You can be more creative with the comps with a unique property type. You can extend your search for comps both farther from a distance perspective as well as a temporal or time-frame perspective. The example already showed the property has already appraised for far more than current principal, which reduces the risk for the lender...and you know what that means when we talk about risk expressed as rate. It should help lower it.
They may not completely top out at the highest appraised value on Earth, but the difference between previous appraisals and current principal balance owed seems like a slam dunk from an LTV standpoint.
I can't guarantee that it won't be difficult, but an appraiser in a rural area should be used to unique property types along those lines. I know of metal buildings that have SFR's built into them out on Cal/Cam Road in Cameron Parish that in rural areas that are appraising for healthy numbers right now.
The one I'm thinking of in particular is currently being elevated out of the Flood Zone down there using federal grant dollars...and the homeowners will tell you that they are not alone with that property type.
This post was edited on 5/31/17 at 4:05 pm
Posted on 5/31/17 at 4:34 pm to GFunk
the issue is a Fannie/Freddie qualified appraisal.Sabine Bank is a local community bank who tends to do more non fannie/freddie qualified loans. the best i can do is tell you its a $500 gamble. You can pick just about any good bank or lender it just boils down to comps on the appraisal.
Posted on 5/31/17 at 10:42 pm to hawkeye007
He can go to the bank and find out who does or who did his appraisal quickly. From there he can have them pull comps. Again, not easy but he's got a lot of opportunities to get this done.
This post was edited on 5/31/17 at 10:43 pm
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