What is the best way to refinance an 80/20 loan?

Asked by Susie, Estero, FL Thu Mar 12, 2009

I have an 80/20 loan with $146K balance on 80% and $37K balance on 20%. Interest rates are 6.5% and 8.375%. According to Zillow, home is worth $156K but we have also had major improvements. Now with the 105% LTV refinance in the stimulus package, I would like to refinance. My question is...what is the best financial way to refinance an 80/20 loan? My mortgage company no longer offers these loans so I can't refinance into another 80/20 loan. They could refinance it into one loan, but then I will have to pay PMI, which will eat up the savings from the lower interest rate. Could I refinance only the 80% loan and base the loan to value ratio only on this loan (rather than having it based on both loans) to avoid PMI? Also, is it common for lenders to offer lender-paid PMI in exchange for a slightly higher interest rate? My lender is Suntrust Mortgage for both loans, and the loans were taken out at the same time (when I purchased the home) . Any advice would be greatly appreciated!

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Chris Lyon, Agent, Venice, FL
Fri Mar 13, 2009

The new government refinnce program is for first mortgages only so it would not help the second. The best bet may be an FHA loan because they will allow higher Loan to Values than conventional refi's. Depending on the LTV the mortgage insurance could be less than you think. Also mortgage insurance can be itemized on your taxe returns like the interest you pay so the savings may come at the end of the year. I also have a conventional lender that will go to higher LTV's depending on the credit scores.

Christopher Lyon
Mortgage Specialist
1 vote
Margaret Has…, Agent, Tampa, FL
Sun Oct 6, 2013
Many of the large banks are offering to refinance (100%) under the Home Affordable Refinance Program (HARP) program, without an appraisal. If you're not behind on your mortgage payments but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program (HARP). HARP is designed to help you get a new, more affordable, more stable mortgage. Call any large banking institution and ask if they offer the HARP program.

Good luck!

Margaret Hassani
Broker, Lightning Realty
Innovation and Experience
(813) 766-1501
Fax (813) 443-0118
0 votes
Rebeccatrulia, Renter, United Amigos, Mesa, AZ
Sun Oct 6, 2013
Hi Susie

If you are planning to buy a home, then one of the first things that you look at is getting a loan. For first-time home buyers, this may be a bit overwhelming. You can hear about all kinds of terms that you don't understand and one of those involves the lender that you work with. You may discover that you can obtain financing through either a lender or a mortgage broker and wonder which one is a better choice for you. Here you can find some information about both parties to help you decide the best option for your situation.To know more search

0 votes
Josh Lerette, Mortgage Broker Or Lender, Lakeland, FL
Sun Mar 15, 2009
Hello Susie,

Like Christopher said before, PMI is tax deductible just like the interest you pay every year. Right now you are at 6.88% combined interest rate. (take the 1st and multiply it by 80% and the 2nd rate by 20% and add them together to give your combined interest rate) Refinancing now to a rate down in the high 4's or low 5's will most likely still lower your payment even if you have to pay MI. Right now I am assuming you have a P&I payment of around $1250 and refinancing the entire loan to a rate of even 5% will lower your payment by $125. Thats with MI. Don't believe what zillow.com says all the time. It's not an accurate valuation of your home. Only an appraiser can really say what the value is. I'd be happy to look up your property value for you and explore your options. Hope you had a wonderful weekend.
0 votes
Bill Eckler, Agent, Venice, FL
Fri Mar 13, 2009
Chris is on the mark....great post!!!
0 votes
Lindsey M. B…, , Ohio
Fri Mar 13, 2009
Hi Susie,

I really do not feel there is anyway you can avoid monthly mortgage insurance, even with a rate increase, it is just not how the market is right now. Currently FHA loan is only going up to 97% loan to value and has monthly mortgage insurance. You can look to just refinance your first mortgage into a FHA loan and subordinate your second mortgage. Subordinate means to leave your second mortgage as is with current terms and just refinance your first mortgage.

I know paying mortgage inusrance stinks, but if you plan on staying in this home it may be a better benefit for you to take advantage of these low interest rates now and pay the mortgage insurance because in the long run when you compare figures on a truth and lending you may be suprised to see it can really benefit you to have a lower rate and mortgage insurance instead of a higher rate and no mortgage insurance.

Good Luck!

Lindsey :-)
0 votes
Sarah Garrett, Agent, Fort Myers, FL
Thu Mar 12, 2009
Susi you are more fortunate than most, you have options. Please contact Cathryn Blair Bennett with First Cap Lending and I am sure she can advise you. cblairbennett@firstcaplend.com. Good luck to you.

Sarah Garrett, Realtor
0 votes
Marc Comisar, Agent, Bonita Springs, FL
Thu Mar 12, 2009
Susie.....you have looked at your bank options. I would suggest you discuss other options with a mortgage broker. I know a great guy in Bonita Springs who will be able to give you a list of possible options. Let me know if you would like his contact information.
0 votes
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