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Need advice on refinance


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Hello all,

I need your advice on what I should do with my mortgages. Here is my situation. Bought a house last November (less then a year ago) and let a loan officer do all the work since I didn't know a darn thing about financing. So, currently I have 2 mortgages on my house since we didn't have enough for a downpayment.

1st mortgage was for $224,000 at 6.625% 30 year fixed

2nd mortgage was for $42,000 at 7.6% 15 year fixed (amortisized as if it was a 30 year loan).

Anyway, I am looking for a way to lower my payments with as little (or no) out of pocket closing costs. I will even take a higher rate since I don't think we'll stay in this house more then 5-7 years. House value is around $300,000 +/- a few $1000's. My current loan amounts are:

1st - $222,000

2nd - $41,650

If I try to combine both loans then I will be hit with PMI. Are there any banks that will let me borrow up to 88% of house value without PMI? Would the same bank offere no out of pocket closing costs (but not rolling in the amount into a new loan)?

Any help would be more then appriciated.



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This may or may not be a simple task.

The very first thing to look at is your prepayment penalties, if either of your loans have them. This can become a very large expense, if you have to pay them to satisfy your current mortgage(s). Six month interest prepayment penalties hit real hard, and even a percentage of value (2% or 3%) in your case would add up to $5,000 to $8,000 range. If this is the case, you will probably want to stay put.

'Since I did not have enough for a down payment"... If you had a 100% loan to value between the two loans when you bought your home,based on your value, you have gained $40,000 in equity in 10 short months. That is great!

Secondly, alot of what interest rate you will be able to get is determined by your credit scores. Also, you also have a small issue with being in the loan for less than a year. Some of your good conventional lenders will require at least 1 year into the loan to consider refinancing.

You can eliminate all your closing costs (or finance them into your loan), and eliminate PMI, but this will come at an increased interest rate.

I also hear you regarding the high payment. Can you help us out with some credit score information and prepayment penalty information, then we can work out a better answer as to whether or not refinancing is a good solution. From the surface I am reading that this may not be in your best interest.

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I don't know exactly what my credit score is but I've never been late in 4 years that I've had a credit card. I have a collection on EX and TU but I am disputing both CRAs as it is not mine. Also got a car loan then I refinanced recently. So, my credit file is barely 4 years old but there no negatives on it (except this collection which I hope will be deleted soon).

A few more details about my mortgage. Original price of the house was $280,000 and we borrowed $266,000. Now the price of the house is around $300,000 with $263,500 combined mortgage. There are no pre-payment penalties with either loan.

Thanks for your help.

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