As Realtors, our livelihood is hurt with the market slow down. Compound that with tighter lending standards and even our buyer clients have a tough time buying homes.
My husband and I purchased a home in the spring of 2005. We knew the price was high, but we had made a lot of profit on the home we had sold so we felt like it was alright. It was a new build so the home kept appreciating while it was being built.
The sale of our previous home gave us enough profit to put 20% down on our new home. Once home prices started dropping my husband and I decided to take out a second mortgage so that we could make some improvements and turn our new house into the home we had envisioned. The reasoning was that if the value of the home was going down that we wanted to grab our equity now. It's not like our lender was sharing the loss with us. The only thing disappearing was the 20% down payment we had made.
Well now interest rates have dropped by more than 1% since we closed on our first mortgage. I want to refinance to take advantage of that. I know it is tougher to get a loan these days, but we have always had really good credit so I wasn't too concerned.
I pulled comps...sure enough it looks like we are upside down on our home now. I was pretty certain that would happen, but we did do a lot of improvements. It's hard to comp unique improvements. I think it is going to be tough to get an appraisal for as much as our first and second mortgages.
I still thought we would be alright. Even if we can only refinance the first mortgage we will be able to save about $400 a month.
Then I spoke with my favorite mortgage lender. It appears a lot of loan programs have disappeared. It sounds like the second is considered a "cash out" which categorizes the mortgage as riskier. All of this means that lenders don't seem to want to refinance a mortgage if our combined loan to value is around 100%, even 95%, and possibly 90%. I didn't think this would affect us, because we have next to no debt besides the home and our credit has always been considered excellent.
Of course I think I am an excellent credit risk, always pay my mortgage, if anything is paid late it is only a couple days and only because of an over sight.
The housing crunch has affected our economy as a whole and the Fed has reduced interest rates to fight that. Now here I am wanting to take advantage of that and I can't. If I could refinance the first and second mortgage we might be able to save over $500 a month to spend and get this economy moving! We are still working on it, but it sounds like my husband and I are out of luck. Pretty disappointing.
I feel like I should have a moral to the story to end with, but I don't. I am sitting here crossing my fingers that the appraiser will love the improvements we made to the home and buck the trend, but its the same as hoping someone will buy an over priced house. It's not going to happen. The market determines the value. Ultimately we can afford our payments, we love our home, and so we cross our fingers and hope our favorite mortgage broker can find a program for us to refinance.
Maybe I can call my current lender and ask for them to refinance without going through with an appraisal.
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