The Housing Bust Hits Home
Inspired by FiveCentNickel, I looked into refinancing both our loans into a single 30-year mortgage. If you recall, we’re 100% financed on our home with 2 loans. The first (80%) is an interest-only, 5/1 arm that’s up in November, 2009, while the second is a 15-year balloon. The plan was to combine the two mortgages into a single loan and lock in a fixed rate while rates are currently low.
I put out a few feelers and spoke with some brokers to see what options I had. We ran into a problem right off the bat though, as I need the home value to still be at the tax assessment rate to seal the deal. Otherwise, I need to pay PMI, which negates any benefits of refinancing. The question was whether my home still appreciated $80,000.
I didn’t proceed with a formal appraisal to get this answer. The last time I looked into refinancing, about a year ago, the appraisal barely squeaked by at the assessed value. Therefore, I could only assume that the home value wouldn’t pass the test this time around. We’re not in a rush right now to refinance, and I decided to wait a little to see what the fed does this week. Maybe rates will drop a little lower?
You may ask “Why aren’t you paying down your mortgage more?”. The answer is because we have so much non-home debt. However, that second mortgage’s rate is by far our highest interest rate, but then again, we get about a third of our interest back in taxes each year, so the rate drops down to the middle of the pack compared to the other debts.
So until we pay off higher debt loans, we’re only paying the minimum on the mortgages and keeping an eye on rates and the market. Who knows, we may be deciding to leave the D.C. area in the next 2 years anyway 😉