Posted on: 08th Nov, 2007 11:37 am
last july of 2007 we purchased an investment property in glendale, az for the price of $300,000. we took a short term interest only construction home loan in the amount of $294,000 at 10.5% for 6 months. we planned to flip the property and did a lot of work to the property and then put it up for sale. prior to the refurbishing, the house appraised for $380,000 and with comp coming from straight across the street that sold for $399,000 in june, we priced at $399,000. as i drove out to the property to put up the for sale sign i got word of the mortgage crunch. in august we had 1 or 2 agent show the house and by september, i thought it was time to lower the price which i did to $369,000 and then to $349,000 in the latter part of the month. the loan i have now is coming up in january and i am wondering if anyone might have a suggestion of what i should do? the thought of renting out the home is an option but i would need to refinance into a much better mortgage so that i could at the very least break even with rent. please let me know if you might have any ideas, thoughts or expert opinions on what we might possibly do?
Hello Erickruse,
If the loan term ends in January, then I think it is better to refinance into a mortgage and put it up for rent.
If you want to make the monthly mortgage payments with the rent then it is better to go for a fixed rate mortgage. In this case, you know exactly how much to pay each month and can fix up the rent accordingly.
You can calculate the reduction in interest after refinancing as well as the break even period with this calculator here http://www.mortgagefit.com/calculators/refinance.html
Hope this helps you.
If the loan term ends in January, then I think it is better to refinance into a mortgage and put it up for rent.
If you want to make the monthly mortgage payments with the rent then it is better to go for a fixed rate mortgage. In this case, you know exactly how much to pay each month and can fix up the rent accordingly.
You can calculate the reduction in interest after refinancing as well as the break even period with this calculator here http://www.mortgagefit.com/calculators/refinance.html
Hope this helps you.
Hi Erickuse,
What I understand from your post is, you wish to put up the house for rent so that using the rent payments you can pay for the closing costs of the refinance loan.
I would like to know what eaxctly you mean by a better mortagge because differnt people have differnt perspectives - some want a low rate, other want low fees, some intend to move on with a fixed rate while others prefer an ARM as they dopn't intend to stay in the property for long. So, where exactly fo you fit in? Are you comfortable with an ARM? If not, then fixed rate should be your option.
You need to shop around with a few lenders and note down the programs that you are likely to get along with the rates and fees. Besides, you need to compare the monthly payments that each loan requires and then choose the one that you can afford.
However, the important thing is that the market rates if lower than your existing mortgage will help you benefit in interest savings when you refinance in January.
It's true that the mortgage industry has been through a crisis, but loans are still available to creditworthy borrowers. I am not aware of your credit scores or your financial situation as such, so I really cannot comment. But you can go for FHA loans as they're insured by the HUD. And the closing costs aren't too high also.
If you have further queries, please feel free to ask.
Take Care
What I understand from your post is, you wish to put up the house for rent so that using the rent payments you can pay for the closing costs of the refinance loan.
I would like to know what eaxctly you mean by a better mortagge because differnt people have differnt perspectives - some want a low rate, other want low fees, some intend to move on with a fixed rate while others prefer an ARM as they dopn't intend to stay in the property for long. So, where exactly fo you fit in? Are you comfortable with an ARM? If not, then fixed rate should be your option.
You need to shop around with a few lenders and note down the programs that you are likely to get along with the rates and fees. Besides, you need to compare the monthly payments that each loan requires and then choose the one that you can afford.
However, the important thing is that the market rates if lower than your existing mortgage will help you benefit in interest savings when you refinance in January.
It's true that the mortgage industry has been through a crisis, but loans are still available to creditworthy borrowers. I am not aware of your credit scores or your financial situation as such, so I really cannot comment. But you can go for FHA loans as they're insured by the HUD. And the closing costs aren't too high also.
If you have further queries, please feel free to ask.
Take Care
WIth this being an investment property, I don't think FHA is going to be a viable option...unliess this is the only home you own, which I am assuming is not the case.
The biggest challenge I see, is the loan to value...yes, there are still loans available, but the part of the market which has been affected most drastically are sub-prime, jumbo, and investor. And for the investor loan, with great credit & assets, you can achieve a 90% loan still, but not in the conforming arena, so you might be surprised by the rate options available to you. They won't be great.
I would start with the folks who currently hold the mortgage...they have the highest interest in you succeeding...
The biggest challenge I see, is the loan to value...yes, there are still loans available, but the part of the market which has been affected most drastically are sub-prime, jumbo, and investor. And for the investor loan, with great credit & assets, you can achieve a 90% loan still, but not in the conforming arena, so you might be surprised by the rate options available to you. They won't be great.
I would start with the folks who currently hold the mortgage...they have the highest interest in you succeeding...
the last post i see, from kpatrick, is the most sensible. go back to your original lender to see what you can negotiate. it would seem that your "equity" has drifted away, which might cause you to have to bring additional funds to your closing.