real estate question
Question: Hey all, was wondering if someone could share some advice for a first time buyer. I am getting a house with a 80/15/5 loan. The 15% loan has a very high interest rate. I’m thinking about getting a loan from another bank for the amount of the 15%, paying off the first lender, and thereby reducing my monthly payments due to the smaller interest rate. The lender’s rate for the 15% is 8.45 on a 15 yr balloon payment. Could I go to another bank and borrow the amount for the 15% at 6.3% and pay the first lender off? Is there some sort of catch I’m missing?
Answer: What makes you think you can get a better deal on a second mortgage from another bank? If you’re talking about a loan secured by something other than the home then maybe, but you’re probably not going to save much in any case. Also, beware of the prepayment penalty — your second (and possibly first) mortgage may have penalties for early payment. I may be missing something because a rate of 6.3% as of 28 June 06 is between 7.5% and 17% for either a HELOC or cash out 2nd mortgage AND the rate does depend on credit, loan to value and assets. For someone to get 6.3% on a 2nd or HELOC would mean paying a high discount rate of at least 5% or thereabouts.
It sounds like you have not purchased yet, to go to another bank and get funds to close will put in possibly, a perilous position as to your debt ratio. 8.45% for a 2nd mortgage is NOT high at all, then again pending on ones perspective. Being a first time home buyer I can understand the reason you believe it is high. Yet the days of 5.75% first mortgages are gone, for now at least, and comprable 2nds at 6.25% are as well.
Good luck
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