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Home Loan Refinancing

quadrupledeac

quadrupledeac

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Stupid question (maybe) for the bankers on the board.

I am currently refinancing my first mortgage as part of HARP 2 eligibility. My second mortgage term (initially a 5 year balloon at 6.25%) is up soon and I will need to refinance as I plan on staying in my current home. The remaining balance of my second mortgage is $160,000. I am currently paying $1800 a month which at the current interest rate would pay off the loan in 10 years. The bank that is financing my second mortgage is suggesting I will need to increase my monthly payment or make a sizable payment on the principle in order for them to sign the subordination agreement that is necessary for refinancing of my first mortgage to proceed. Is this customary? What refinancing terms on my second mortgage can I expect? Can I shop my second mortgage around or am I locked in to the terms that my current bank offers? Thanks in advance for the advice.
 
You have a 160,000 balance on a second? That's more than ChrisL's current home costs.
 
quadrupledeac said:
Stupid question (maybe) for the bankers on the board.

I am currently refinancing my first mortgage as part of HARP 2 eligibility. My second mortgage term (initially a 5 year balloon at 6.25%) is up soon and I will need to refinance as I plan on staying in my current home. The remaining balance of my second mortgage is $160,000. I am currently paying $1800 a month which at the current interest rate would pay off the loan in 10 years. The bank that is financing my second mortgage is suggesting I will need to increase my monthly payment or make a sizable payment on the principle in order for them to sign the subordination agreement that is necessary for refinancing of my first mortgage to proceed. Is this customary? What refinancing terms on my second mortgage can I expect? Can I shop my second mortgage around or am I locked in to the terms that my current bank offers? Thanks in advance for the advice.
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What's your first and what is your home worth?
 
First is $340,000. Haven't had it appraised, but based on zillow and last property tax estimate, probably close to $470,000 (bought for $610,000 in 2008 prior to crash).
 
If my experience was typical, you're pretty much stuck. I refinanced my mortgage and had a home equity line with BOA that put them in the second position. They refused to subordinate on my refinance. For those not following at home, they refused to agree to go from second position to second position with only a different bank in first position. I pushed them on it and they refused to budge. I ended up having to pay off the HELOC in order to be able to refinance my mortgage. Granted that was around 30k so that may not be feasible at 160k.
 
I don't really see what advantage the second lender gets in not subordinating as they are already in second and presumably the refi of your first will ease your monthly debt burden, reducing the chances of you defaulting on your payments. However, I guess with the balloon of your second, they are trying to force you into either right-sizing it now against the value of your house or at least accelerating so they won't have to report it as a LTV exception for as long. I'm sure they don't want to foreclose and eat pretty much the whole thing so I'd just put pressure back on them to renew your second at reasonable terms.
 
Oh, and shopping your second is likely a waste of time. I'd be shocked if another bank would do something >100% LTV. Someone closer to retail banking can correct me if I'm wrong. Your best bet is to work it out with the bank that's already pregnant with your baby.
 
bmoneydeac said:
I don't really see what advantage the second lender gets in not subordinating as they are already in second and presumably the refi of your first will ease your monthly debt burden, reducing the chances of you defaulting on your payments. However, I guess with the balloon of your second, they are trying to force you into either right-sizing it now against the value of your house or at least accelerating so they won't have to report it as a LTV exception for as long. I'm sure they don't want to foreclose and eat pretty much the whole thing so I'd just put pressure back on them to renew your second at reasonable terms.
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Sounds like you figured it out. I would think that since the second is a higher risk position to the institution (and thus carries a higher rate) they'd be glad to get the payoff now rather than later. They can also re-lend the money in an environment of rising interest rates, rather than his interest only lock at 6% or whatever.
 
Oh, of course they'd prefer to see a payout. Just don't see how that's possible on a 100+% LTV on a second. They're stuck with it, they may as well try to get a loan that looks likely to be paid back.
 
Marquee Moon said:
You have a 160,000 balance on a second? That's more than ChrisL's current home costs.
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Heh, not as of Sunday.

A $160,000 2nd mortgage would cause me to wake up at 5 AM every morning.

PS: LOL at the Tags
 
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quadrupledeac said:
First is $340,000. Haven't had it appraised, but based on zillow and last property tax estimate, probably close to $470,000 (bought for $610,000 in 2008 prior to crash).
Click to expand...

Zillow is not very accurate on values (at least in my neighborhood). And tax estimate is probably light also. Have any houses sold recently in your neighborhood? If so, that would be a better indication of value.

Where are you located?
 
Not so fast ATLDeac. As I learned from a property tax appeal, the property tax assessment is accurate, even moreso than an appraisal.
 
A similar problem killed my efforts at refinancing recently. Freakin' Wells Fargo would not agree to the subordination - and my valuation wasn't even so bad as to put me >100$ LTV. I think total of both mortgages put me around 90% but WF said they would not agree unless the total was 75% or less. BS!
 
So they came back and are willing to subordinate if I accept refinancing terms on the second as follows: 35 month balloon amortized over 100 months with a floating rate of prime plus 0.75% with a floor of 5.5% (current rate is 6.25% and I have no idea what prime rate currently is). This would put my monthly payment at just over $200 more than I am currently paying. I have to pay for an appraisal and loan fees on the new second mortgage which is close to $1,000. It looks like I don't have a choice as I am currently underwater. However at the end of the 35 month balloon, I will almost certainly be under 100% LTV. What flexibility with refinancing can I expect then when I no longer owe more than the house is worth? The free advice from those in the know is priceless, as are the references to arson and the hilarious tags. Thanks again.
 
Prime is currently 3.25%. Obviously your floor will be the rate you pay until Prime goes up over 150 bps.

Not sure about refi opportunities until you get to something more in the 80-85% LTV when adding up your first and second. Banks just aren't as willing to go past that anymore like they used to. They'll make more exceptions if you are a high net worth guy.
 
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