How long should we wait to refinance?
October 3rd, 2008, 3:00 am · 5 Comments · posted by Mathew Padilla, Reporter
Randy Johnson of Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions.
Sally in Trabuco Canyon asks:
Q. My husband and I have an adjustable-rate loan on our home and the principal balance goes up about $1,000 each month. We are paying $1,636 (per month) in interest. How far in advance of our payment ballooning (due to principal reaching a maximum loan-to-value) should we refinance for a fixed-rate loan? Our principal balance currently is $418,727. I think the “balloon payment” will hit in two to three years.
A. I would not wait. Who knows what rates will be like in a few years, maybe 8%. Now would be a perfect time to trade in your ARM for a fixed-rate loan. The rate actually may be less than the “real” rate on your ARM.
Stashingmycash asks:
Q. Why are credit lines and hard-money lenders exempt from Reg Z?
A. I do not believe either is exempt. Home equity lenders are required under Sec. 226.5b to provide disclosures. Not only is there no exemption for hard money lenders, but they have additional requirements under Sec 226.32 — the so-called HOEPA, which covers high-rate and high-fee loans. In California, all real estate lenders must also complete a form similar to the Good Faith Estimate. You may read about Regulation Z HERE, and HOEPA HERE.
Linda in Huntington Beach asks:
Q. I have question about debt-forgiveness after short sale or foreclosure. Do I have to claim income tax after either a short sale or foreclose, and which one is better?
A. Old tax rule says “forgiveness of debt” is income, and taxable income at that! I believe that legislation in 2007 exempted some people from the rule, so you have to check with a CPA and an attorney to find out the current rules and how they apply to you.
That’s it. Read prior questions and answers by clicking on the headlines below…
- When mortgage paperwork becomes a nightmare
- Can you be too old to get a mortgage?
- Why aren’t foreclosures cheaper?
- When you can’t afford your mortgage
- How much to put down and other mortgage answers
If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla at ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it.
October 3rd, 2008 at 7:41 am
These people are adding $1,000 per month to their mortgage balance and you’re suggesting that they switch to a (presumably ammortizing) fixed rate mortgage. Talk about telling a drowning man to take swimming lessons. If they can’t afford to pay the interest only amount on their mortgage, there’s really no reasonable expectation that they’ll be able to afford a fixed rate mortgage.
October 3rd, 2008 at 9:32 am
and these are the typical types of reckless loans/situations that we are suppose to bail reckless homeowners out of by writing down their loans or getting them into another loan? afterall, the lender put a gun to the borrowers head.. unbelievable
October 3rd, 2008 at 11:53 am
Not only that, but she may not be able to refi if her property value puts her loan underwater.
October 3rd, 2008 at 4:29 pm
the answer to the first question should be:
1. schedule a moving truck
2. get some some boxes
3. pack your things
4. google: “how to strip copper wire”
October 5th, 2008 at 9:04 am
I think you are all very funny but missed the point. She IS making a payment. The type of loan she has is the offender. If she refi’s now she won’t be end up paying a higher rate later. It would be pretty stupid not to do it now. Rates will rise again. Just cause she’s looking for a better option doesn’t mean she can’t make her payment. I didn’t see anything saying I can’t make my payment, help,help. But I love the bit about the google and copper, very funny in a sick way.