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Started By
Message
Should I refinance to take advantage of increased property value?
Posted on 8/16/19 at 10:25 am
Posted on 8/16/19 at 10:25 am
I don't know why it's taken me this long to bring this here...I lurk this board frequently (as you can tell by my post count and years as a member I lurk more than post) and appreciate the advice you folks give. So if you don't mind, this is my scenario:
Purchased home a little over 2 years ago. Have a conventional 30 yr fixed note @ 4.625% but only put 5% down. I live in Texas so between property tax, PMI, and homeowners I'm paying as much to escrow as I am to principal and interest. Property values all over Waco but particularly in our area have jumped significantly over the last 5 years in tiers. $80/sqft to $105/sqft to now $115-120/sqft. Just in the 2 years I have owned the home, the tax assessed value has risen $80k.
My idea is to refinance the home to take advantage of the increased value as realized % equity in the home. This would take me above the 20% equity line so I could drop the PMI from the loan. My credit score has improved since purchase enough that even with rising rates I think I could get a similar rate as I already had.
All of this said, would this be a good idea? Does anyone know of any other way to do what I am trying to without refinancing? I feel like my logic is sound to me, but I'm also no expert in mortgages. Any advice would be appreciated!
Purchased home a little over 2 years ago. Have a conventional 30 yr fixed note @ 4.625% but only put 5% down. I live in Texas so between property tax, PMI, and homeowners I'm paying as much to escrow as I am to principal and interest. Property values all over Waco but particularly in our area have jumped significantly over the last 5 years in tiers. $80/sqft to $105/sqft to now $115-120/sqft. Just in the 2 years I have owned the home, the tax assessed value has risen $80k.
My idea is to refinance the home to take advantage of the increased value as realized % equity in the home. This would take me above the 20% equity line so I could drop the PMI from the loan. My credit score has improved since purchase enough that even with rising rates I think I could get a similar rate as I already had.
All of this said, would this be a good idea? Does anyone know of any other way to do what I am trying to without refinancing? I feel like my logic is sound to me, but I'm also no expert in mortgages. Any advice would be appreciated!
9
Posted on 8/16/19 at 10:36 am to jbrau22
I think it's a decent idea. 30yr fixed right now is near 3.5%, so if you can drop a point in interest and remove PMI it's likely worth it.
Posted on 8/16/19 at 10:46 am to jbrau22
quote:Yes, but I'd be conservative on the amount of the new loan pulling out too much equity.
All of this said, would this be a good idea?
Posted on 8/16/19 at 10:49 am to jbrau22
How much have property taxes gone up with $80K increase in assessment?
Posted on 8/16/19 at 11:03 am to jbrau22
1st major point is how long do you and your family plan on living in your current home. The longer you do the more sense a refinance makes.
You are the perfect candidate to refinance right now. You could more than likely cut off PMI and drop ~1% or more depending on how long of a term you go with.
If your current payment fits into your budget you could probable drop to a 20 yr. term, drop the rate to ~3.375%, and cut off PMI. Those two benefits would more than likely have you paying even slightly less than what you currently are depending on your loan amount.
If today's rates were equivalent or higher to what you had, I would say just go to your current mortgage servicer and ask them what their steps are to dropping the PMI and they would walk you through it. But with where rates are you might as well kill two birds with one stone and help yourself out with a refi.
If you have any in depth questions send me an email as I originate loans in Texas.
You are the perfect candidate to refinance right now. You could more than likely cut off PMI and drop ~1% or more depending on how long of a term you go with.
If your current payment fits into your budget you could probable drop to a 20 yr. term, drop the rate to ~3.375%, and cut off PMI. Those two benefits would more than likely have you paying even slightly less than what you currently are depending on your loan amount.
If today's rates were equivalent or higher to what you had, I would say just go to your current mortgage servicer and ask them what their steps are to dropping the PMI and they would walk you through it. But with where rates are you might as well kill two birds with one stone and help yourself out with a refi.
If you have any in depth questions send me an email as I originate loans in Texas.
Posted on 8/16/19 at 11:30 am to ItzMe1972
quote:
How much have property taxes gone up with $80K increase in assessment?
About $2.5k over the last two years.
Posted on 8/16/19 at 11:32 am to HYDRebs
quote:
1st major point is how long do you and your family plan on living in your current home. The longer you do the more sense a refinance makes.
You are the perfect candidate to refinance right now. You could more than likely cut off PMI and drop ~1% or more depending on how long of a term you go with.
If your current payment fits into your budget you could probable drop to a 20 yr. term, drop the rate to ~3.375%, and cut off PMI. Those two benefits would more than likely have you paying even slightly less than what you currently are depending on your loan amount.
If today's rates were equivalent or higher to what you had, I would say just go to your current mortgage servicer and ask them what their steps are to dropping the PMI and they would walk you through it. But with where rates are you might as well kill two birds with one stone and help yourself out with a refi.
If you have any in depth questions send me an email as I originate loans in Texas.
Thanks for all of the advice. I thought that it was sound logic to me but I appreciate a professional taking time to respond.
Thanks to everyone for all of your time and thoughtful advice.
Posted on 8/16/19 at 2:10 pm to jbrau22
You don’t have to refinance you know, you can usually just get a new appraisal done and take that to the bank to get your pmi dropped.
Check with your bank first.
Check with your bank first.
This post was edited on 8/16/19 at 2:10 pm
Posted on 8/16/19 at 2:45 pm to baldona
Not as likely if your loan was originated in 2013 or after. HUD changed the PMI rules then.
Posted on 8/16/19 at 3:11 pm to jbrau22
Do it. Almost the exact scenario we had when we did it a couple years ago. Dropping to 3.5 and removing pmi will pay for itself pretty quickly.
Posted on 8/16/19 at 3:25 pm to jbrau22
quote:
Does anyone know of any other way to do what I am trying to without refinancing?
You would have to ask your bank to reconsider the PMI. They typically want some sort of proof that the value of the property went up (i.e., remodeling). In addition, they will also typically require 25% in equity to remove the PMI early.
That was my experience I went through to remove mine.
Posted on 8/17/19 at 5:00 pm to jbrau22
I closed on a refi yesterday in a similar situation. Built my house and original mortgage/purchase price wasn’t representative of appraised value. Went from 4.75 to 3.875 and dropped PMI.
I definitely think it’s worth it if you plan to stay for a while. Need to factor in upfront loan costs to determine payback horizon if you don’t plan to be there for a while.
I definitely think it’s worth it if you plan to stay for a while. Need to factor in upfront loan costs to determine payback horizon if you don’t plan to be there for a while.
Posted on 8/18/19 at 10:03 am to jbrau22
I'm in process of refinancing now. I initially put down 14.5% and had a 4.5 rate when I closed in April, with pmi. I am going to a 3.75 rate without PMI. Some lenders don't require PMI with as little as 15%, depending on income, credit, etc.. I'm using Area Home Lending as the broker.
Posted on 8/18/19 at 11:25 am to jbrau22
Were going through a cash-out refinance right now. Bought the house in 2014 at 3.875% on a 30-year mortgage with little down. We’ve been paying PMI, adding a little extra to our monthly payment, and we sunk a bunch of cash into renovation.
With rates back low, I thought it was a good time to consider refinancing. I debated just refinancing the current balance and removing PMI to reduce our note overall. But decided on a cash-out at a level where my monthly note stays the same with drop of PMI.
Just got through appraisal and the appraised value of the house is about 44% higher than the price we bought. We’re resetting our mortgage balance a little higher than our original purchase price, but keeping loan-to-value around 75% and taking some cash out. Our interest rate will be 3.875%, which is the same as our current rate and, to me, seems pretty damn good for a cash-out refi.
With rates back low, I thought it was a good time to consider refinancing. I debated just refinancing the current balance and removing PMI to reduce our note overall. But decided on a cash-out at a level where my monthly note stays the same with drop of PMI.
Just got through appraisal and the appraised value of the house is about 44% higher than the price we bought. We’re resetting our mortgage balance a little higher than our original purchase price, but keeping loan-to-value around 75% and taking some cash out. Our interest rate will be 3.875%, which is the same as our current rate and, to me, seems pretty damn good for a cash-out refi.
This post was edited on 8/18/19 at 11:29 am
Posted on 8/18/19 at 11:34 am to MaxDraft
Refinancing now as well. Got a 30 year fixed 3.375 which down from 4.125 two years ago. It will take me about 14 months to get back the closing/bank fees and I plan to be in the house 5-10 more years so it made sense.
Posted on 8/19/19 at 10:04 am to lighter345
that seems incredibly fast break-even point. how much was the refi for and what were closing fees?
Posted on 8/19/19 at 11:07 am to deNYEd
$320K and closing costs were $1900 plus $1550 in lender fees(appraisal etc). Maybe I’m doing the math wrong but basically I’m paying $2655 a month currently including insurance/tax and will be paying $2444 with refinance. No additional money out. So wouldn’t the “break even” time be refinance fees divided by difference in pre vs post refinance monthly payment? Which is 16 months not 14. This is my first time doing this so maybe I have it wrong.
This post was edited on 8/19/19 at 11:09 am
Posted on 8/19/19 at 1:57 pm to lnomm34
quote:
Were going through a cash-out refinance right now. Bought the house in 2014 at 3.875% on a 30-year mortgage with little down. We’ve been paying PMI, adding a little extra to our monthly payment, and we sunk a bunch of cash into renovation.
With rates back low, I thought it was a good time to consider refinancing. I debated just refinancing the current balance and removing PMI to reduce our note overall. But decided on a cash-out at a level where my monthly note stays the same with drop of PMI.
Just got through appraisal and the appraised value of the house is about 44% higher than the price we bought. We’re resetting our mortgage balance a little higher than our original purchase price, but keeping loan-to-value around 75% and taking some cash out. Our interest rate will be 3.875%, which is the same as our current rate and, to me, seems pretty damn good for a cash-out refi.
That rate for a cash out sounds really good. Did you use a local bank or someone national? We are considering doing something very similar to what you described.
Posted on 8/19/19 at 2:02 pm to CAT
Yea, I thought the 3.875% for cash-out was great. Been looking for this opportunity for a while but didn’t think I’d be able to accomplish it at the same interest rate I had. When I saw rates dip down that low again, I jumped.
We’re using an online lender. The costs are WAY lower than local. We are supposed to be signing papers this week. So far, the process has been pretty damn smooth, but I don’t want to breathe easy until the ink is on paper.
We’re using an online lender. The costs are WAY lower than local. We are supposed to be signing papers this week. So far, the process has been pretty damn smooth, but I don’t want to breathe easy until the ink is on paper.
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