Refinancing? (Part 1)

Our “Investment Property”

I was reading Reader’s Digest this week and saw the following in an article titled, “Cents and Sensibility” by Beth Kobliner:

“If you have a mortgage, know the interest rate.  And learn if, when, and how it adjusts and whether refinancing makes sense.  Consider downsizing to a smaller home, a step that one in five Americans took last year.”

I was happy to read this bit of advice because I had just done that this week!  Brad and I like to check on these things regularly to see if there have been any changes:

 

  • First, I called Wells Fargo, which handles the larger portion (80%) of our mortgage.  The man I spoke to was very helpful and explained that our house might be eligible for a refinance through the new federal Home Affordable Refinance program because it is a Freddie Mac loan.  When I informed him that the house was a rental property though, he told me that “investment properties” are ineligible for this program.  (He did note the irony that we rented the house because we couldn’t sell it, and now we can’t refinance because we rent it.) So I asked if we were eligible for any other refinancing programs.  Unfortunately, we are not because our home is “upside-down” (the worth of the property is less than the worth of the loan).  I was able to open an on-line account where I could look at the most recent updates on the state of our mortgage.
  • Next, I called Citimortgage, which handles the second portion (20%) of our mortgage.  Again, the gentleman I spoke to was very helpful.  He explained that given our situation, the only way we could refinance would be to look for a high appraisal.  (Unfortunately our house is only worth 2/3 of the price we paid for it in 2005.)  He said that our current monthly payment and interest rate aren’t too bad as far as second mortgages go.  They do have some programs for people who have lost their jobs, but these programs usually aren’t employed until payments are missed, and credit is bad.  Even these programs only temporarily lower payments and interest rates, and then raise it again later…eventually costing the homeowner more.  Again, I was able to open an on-line account, and what I liked about Citimortgage’s website is that I can do on-line bill pay directly from our current checking account.

 

Aside from regularly checking on the state of our mortgage and any possibilities for lowering cost, we keep an index card with a small graph on it, showing our loans, due dates, interest rates, and payoff amounts.  This keeps us on the same page financially, and keeps motivating us to shrink those amounts.

You’re only a few phone calls away from knowing the details of your mortgage and possibly reducing your costs and rates.  How have you saved on your mortgage payments?

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8 Responses to “Refinancing? (Part 1)”

  1. [...] to list that with our debts.  (Dave usually recommends saving your mortgage for last, but we have two mortgages, and our smaller one has the lowest pay-off and the highest interest [...]

  2. [...] you will notice one large number is absent.  Brad and I paid off the second mortgage on our “Rental Property” in Maryland!  Our tax refunds arrived, and we promptly paid off our debt to Citimortgage.  [...]

  3. Anonymous says:

    It is good to consider all the possibilities when considering refinancing. In our situation, the only way we could save money was to convert our second mortgage to a personal loan through Discover. This lowered our interest rate and nearly doubled our monthly payment, putting us on aggressive track to pay off the loan in 7 years instead of 25, saving us tens of thousands of dollars. The amount of tax deductions that we lost is far less than our total savings, and we are still able to itemize deductions. Our payments are now 60% principal, compared to about 10% principal when it was a mortgage.

    • Jessica says:

      Thanks for sharing your experiences! We’re hoping to ask Wells Fargo about it again soon, but we were denied last time on two counts: 1) It’s a rental property. 2) It’s worth less than we owe on it. Since those two things are still the same, even though we paid off the second mortgage, I expect we still wouldn’t qualify for a refinance.

  4. [...] Click here to read “Refinancing? (Part 1).” [...]

  5. [...] to list that with our debts.  (Dave usually recommends saving your mortgage for last, but we have two mortgages, and our smaller one has the lowest pay-off and the highest interest [...]

  6. [...] here to read “Refinancing? (Part 1)” and “Refinancing? (Part [...]

  7. [...] here to read “Refinancing? (Part 1)”, “Refinancing? (Part 2)”, “Refinancing? (Part [...]

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