Help me understanding refiance
August 22, 2011 9:40 AM Subscribe
Refinance advice needed with some specifics:
We want to refinance our home, and do it as quickly and painlessly as
possible. Of particular importance, I don't want to get a home
inspection or appraisal.
Avoiding the home inspection is of particular importance, I'm in the middle of a couple remodeling projects, so the house is a jumble of bare floors in some rooms and furniture, etc .. . packed wall to wall in other rooms from the stuff that belongs in the rooms that are being worked on. Aside from that, we refinanced about 8 years ago, and I remember being extremely stressed having to get everything ready for the home inspector. I really want to avoid it if possible.
Appraisal: I think I want to avoid just because housing prices are down. I'm less knowledgeable here, though, so maybe there is a good reason to do it that I don't know. We bought our house in the late nineties, before housing prices went CRAZY, but I'm still concerned that it could be valued at less than what we have on the house, if we include the second mortgage, if the prices have dipped too much. The last city appraisal for tax purposes we weren't upside-down, but I don't know how much an appraisal done for the refinance would differ.
I also was wondering if I can roll the second and first mortgage into one? Can that be done? I swear someone told me that its not a good idea to do that, but I can't recall why.
Finally, as this might impact the answers, our credit history isn't great - I'm not sure how that will impact refinancing. We had trouble some years ago when we were both laid off at the same time, and had a bunch of debts we couldn't pay. Since then, we've both managed to take care of most of it. My husbands credit score is good, mine is not great, but I have a few things on my credit report I didn't realize were even there that I can pay off before attempting to refinance.
Avoiding the home inspection is of particular importance, I'm in the middle of a couple remodeling projects, so the house is a jumble of bare floors in some rooms and furniture, etc .. . packed wall to wall in other rooms from the stuff that belongs in the rooms that are being worked on. Aside from that, we refinanced about 8 years ago, and I remember being extremely stressed having to get everything ready for the home inspector. I really want to avoid it if possible.
Appraisal: I think I want to avoid just because housing prices are down. I'm less knowledgeable here, though, so maybe there is a good reason to do it that I don't know. We bought our house in the late nineties, before housing prices went CRAZY, but I'm still concerned that it could be valued at less than what we have on the house, if we include the second mortgage, if the prices have dipped too much. The last city appraisal for tax purposes we weren't upside-down, but I don't know how much an appraisal done for the refinance would differ.
I also was wondering if I can roll the second and first mortgage into one? Can that be done? I swear someone told me that its not a good idea to do that, but I can't recall why.
Finally, as this might impact the answers, our credit history isn't great - I'm not sure how that will impact refinancing. We had trouble some years ago when we were both laid off at the same time, and had a bunch of debts we couldn't pay. Since then, we've both managed to take care of most of it. My husbands credit score is good, mine is not great, but I have a few things on my credit report I didn't realize were even there that I can pay off before attempting to refinance.
[insert clever name here]: "Appraisal: I think I want to avoid just because housing prices are down."
So you want to get a loan based on a fictitious number? I though those went out with the 2008 crash. It sounds like you don't have a good idea what the appraisal might be. There's all kinds of caveats, but zillow does at least give you a guesstimate.
posted by pwnguin at 9:51 AM on August 22, 2011
So you want to get a loan based on a fictitious number? I though those went out with the 2008 crash. It sounds like you don't have a good idea what the appraisal might be. There's all kinds of caveats, but zillow does at least give you a guesstimate.
posted by pwnguin at 9:51 AM on August 22, 2011
Do you belong to a credit union, especially one with a strong relationship with members? They are sometimes better about lending. With not-so-great credit, you almost certainly need an appraisal and inspection; banks are exceptionally conservative about loans for now. However, if you say it's to finish the construction, then the projects are not such a problem. The appraisal means you aren't going to be able to borrow more than about 75 - 80% of the equity, and that's actually not a bad thing.
posted by theora55 at 10:00 AM on August 22, 2011
posted by theora55 at 10:00 AM on August 22, 2011
My credit union didn't require an inspection when we refinanced a few years back, but they did require a new appraisal. You'd be wise to finish paying off those debts and completing those remodeling projects before approaching a lender to refinance. Your tax estimate and zillow's wild guesstimate are what they are but a lender ain't gonna be willing to use those numbers.
posted by pappy at 10:06 AM on August 22, 2011
posted by pappy at 10:06 AM on August 22, 2011
My husband and I have A+ credit and a ton of equity in our house because we bought a long time ago. We've refinanced several times over the years to take advantage of falling rates, and every single time we've had to get an inspection and appraisal. I really don't think you're going to be able to avoid it.
posted by BlahLaLa at 10:09 AM on August 22, 2011
posted by BlahLaLa at 10:09 AM on August 22, 2011
lessons learned from my refi...
You'll need an appraisal, and if their are no actual sales in your neighborhood, just short-sales and foreclosures, they might base your price around that... which SUCKS... my home was appraised about 1/3rd less than what i paid, but close enough that i qualified for a special refi (one of the federal freddiemac ones...)
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posted by fozzie33 at 10:17 AM on August 22, 2011
You'll need an appraisal, and if their are no actual sales in your neighborhood, just short-sales and foreclosures, they might base your price around that... which SUCKS... my home was appraised about 1/3rd less than what i paid, but close enough that i qualified for a special refi (one of the federal freddiemac ones...)
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posted by fozzie33 at 10:17 AM on August 22, 2011
I refinanced about a year ago with the same lender and I only needed an appraisal. I wouldn't have minded getting an inspection, but not requiring saved on costs. I shopped around but found that my current lender had a fair offer and the paperwork was streamlined.
Regarding the wisdom of rolling the primary and HELOC into one loan, the only reason I can think of to not do it is to avoid Personal Mortgage Insurance. Pre 2006 it was a common solution to use a HELOC to borrow up to 90% of the home value without PMI but I haven't heard of this being done often. You probably need to close out the second mortgage along with the first when you refinance so the decision may be made for you on this one.
posted by dgran at 10:34 AM on August 22, 2011
Regarding the wisdom of rolling the primary and HELOC into one loan, the only reason I can think of to not do it is to avoid Personal Mortgage Insurance. Pre 2006 it was a common solution to use a HELOC to borrow up to 90% of the home value without PMI but I haven't heard of this being done often. You probably need to close out the second mortgage along with the first when you refinance so the decision may be made for you on this one.
posted by dgran at 10:34 AM on August 22, 2011
Many refinances don't require an inspection but I don't think anyone is going to for no appraisal, maybe if you have tremendous equity. A equity line might be a better option.
posted by shoesietart at 10:36 AM on August 22, 2011
posted by shoesietart at 10:36 AM on August 22, 2011
I refinanced earlier this year through a refinance brokerage and didn't need an appraisal or inspection.
I'm not sure how or why - and this probably varies by state. In they end, they used the county assessed property value - which was much lower than any retail appraisal would have been. But the property tax value was still over 50% higher than the principle.
So yeah - it's possible in some places at least.
posted by thatguyjeff at 10:50 AM on August 22, 2011
I'm not sure how or why - and this probably varies by state. In they end, they used the county assessed property value - which was much lower than any retail appraisal would have been. But the property tax value was still over 50% higher than the principle.
So yeah - it's possible in some places at least.
posted by thatguyjeff at 10:50 AM on August 22, 2011
We refinanced this year - we needed appraisal but no inspection. Also, we rolled the original mortgage + heloc into 1 mortgage. We had to pay a slightly higher amount since the refinanced balance was higher than the original mortgage balance.
posted by dabug at 10:55 AM on August 22, 2011
posted by dabug at 10:55 AM on August 22, 2011
Response by poster: Well I have researched this topic a bit and I know for certain that some loan types can be done without an appraisal (see: http://www.refinancemortgagerates.org/refinance-your-mortgage-without-an-appraisal/) But I wasn't able to find an answer about inspections and I wasn't sure about they types of loans or the things needed to qualify for that type of loan.
posted by [insert clever name here] at 11:57 AM on August 22, 2011
posted by [insert clever name here] at 11:57 AM on August 22, 2011
Well I have researched this topic a bit and I know for certain that some loan types can be done without an appraisal
Just because they have a name / category doesn't mean they're offered anymore. All kinds of crazy shit went on in the middle of the past decade. And many of those crazy places went out of business, or were bailed out.
Probably, you'll have to resort to boots on the ground work: call up a few mortgage brokers from the phonebook and ask if they do what you want. And then let us know so I can buy insurance on their debt =)
posted by pwnguin at 1:07 PM on August 22, 2011
Just because they have a name / category doesn't mean they're offered anymore. All kinds of crazy shit went on in the middle of the past decade. And many of those crazy places went out of business, or were bailed out.
Probably, you'll have to resort to boots on the ground work: call up a few mortgage brokers from the phonebook and ask if they do what you want. And then let us know so I can buy insurance on their debt =)
posted by pwnguin at 1:07 PM on August 22, 2011
Best answer: I believe your ability to refinance will depend on the equity in your home, your credit history and the local bank(economy). The interest rate you pay will be based on those same factors. We secured a substantial line of credit on our home, with no inspection or appraisal, but the mortgage was over 90% satisfied. In fact--we paid off the mortgage with the line of credit as the interest rate on the later was 1.25 percent less. I doubt if you will be able to refinance without an appraisal unless you have an outstanding credit rating and substantial demonstrated equity.
posted by rmhsinc at 2:15 PM on August 22, 2011 [1 favorite]
posted by rmhsinc at 2:15 PM on August 22, 2011 [1 favorite]
I have excellent credit and just completed a refi. The amount of the loan was less than half of what the lot alone would sell for, and the lender wanted an appraisal. I think that many lenders are extremely skittish after the recent debacle.
No inspection, although the appraiser walked through the entire house taking photos.
posted by Daddio at 4:27 PM on August 22, 2011 [1 favorite]
No inspection, although the appraiser walked through the entire house taking photos.
posted by Daddio at 4:27 PM on August 22, 2011 [1 favorite]
A conventional appraiser can also have some funny ideas about what "must" be complete in order to constitute, say, a bathroom for appraisal purposes. On the one hand this is sensible; banks are not in the business of completing unfinished renovations in foreclosed homes.
On the other, we ripped out a bathroom, including replacing the subfloor, tiling the floor, recoating the tub, etc. I mean a complete redo. When we refinanced (no cash out, just your typical "rate and term" refi) the appraiser was really concerned that the toilet had not been installed yet. There was no sink, either, but no, the real problem was that it couldn't be, for their purposes, a real bathroom without a toilet. Never mind that we had cut out the whole subfloor and rebuilt it, never mind the new shower valve soldered into place, no, the question was, could we successfully fasten two screws and apply caulk to a toilet?
We hooked up the toilet while the appraiser was there, and she was satisfied. Who knew it was so easy?
posted by wnissen at 10:50 PM on August 22, 2011
On the other, we ripped out a bathroom, including replacing the subfloor, tiling the floor, recoating the tub, etc. I mean a complete redo. When we refinanced (no cash out, just your typical "rate and term" refi) the appraiser was really concerned that the toilet had not been installed yet. There was no sink, either, but no, the real problem was that it couldn't be, for their purposes, a real bathroom without a toilet. Never mind that we had cut out the whole subfloor and rebuilt it, never mind the new shower valve soldered into place, no, the question was, could we successfully fasten two screws and apply caulk to a toilet?
We hooked up the toilet while the appraiser was there, and she was satisfied. Who knew it was so easy?
posted by wnissen at 10:50 PM on August 22, 2011
We have had very good luck working with a mortgage broker. She has found us some good loans (we tend to refinance whenever a no point/no fee refi saves us money). I would expect to her to know what the lender would require - both in terms of inspections and also credit scores.
In California, we have needed a current appraisal every time refinance but never an inspection (except when selling but that was for the buyer, not the bank.)
posted by metahawk at 12:01 AM on August 23, 2011
In California, we have needed a current appraisal every time refinance but never an inspection (except when selling but that was for the buyer, not the bank.)
posted by metahawk at 12:01 AM on August 23, 2011
Response by poster: Thanks everyone. I'll check with a mortgage broker just to see, but it sounds like the real answer is that I need to finish the remodeling work before I pursue this any further. My plan this winter was to go right from one home project to the next, but I think we'll have to wait until we refinance to do the next to ensure there aren't any unfinished projects. I had hoped to refinance sooner to try to take advantage of the low interest rates, but I guess I can only cross my fingers they stay low for a few months longer.
posted by [insert clever name here] at 9:51 AM on August 29, 2011
posted by [insert clever name here] at 9:51 AM on August 29, 2011
This thread is closed to new comments.
posted by jerseygirl at 9:49 AM on August 22, 2011