Do you need a down payment to refinance?

I need expert help on my Refi what would you do?

• the value came in at $275,000 We purchased for $325,000 3 years ago. We do need to re-think how we are going to do refinance. 1. qualify for the fanniemae refinance plus- which means we don’t need to get mortgage insurance? It is a 30 year only product and taxes and insurance will need to be part of the payment. This is probably your most cost effective option. But who wants another 30 year? You can always payoff early at no penalty- so if you wanted to amortize out over 20 years you can add a principal reduction to each payment? How would that work? Rates for this are approx 4.25 at a .004 discount ( principal and interest $1156) Or 4.00 at approx .756 discount ( principal and interest 1122) Seems like the lender is pointing me in this direction. 2. The other option is to keep the current loan amount of 325,000 and 20 year term- but you will need to have mortgage insurance. Taxes and insurance will also need to be part of the payment (so they will be collecting 12 months of taxes at closing as we’re almost at the time they are due.) The mortgage insurance will add approximately 100.30 to your payment 3. If we lower your mortgage to 233,750 (85%) the mortgage insurance is reduced to 73.00 a month. Mortgage insurance is required for 2 years- at that time if the market goes back up we can ask to have it removed? It will automatically come off at 78% loan to value of the original note/appraised value. What would you do?

• Answer:

  1) Yes, you can set up your EFT for more than the payment amount with the balance being applied to your mortgage principal. It's quite common. Alternatively what I do is "save" the extra principal by marking it as unspendable in my checking account. Then twice a year, I make an extra payment for 6 months in principal - or I apply that money to some other goal, savings, car-loan, etc... 2) You should not need to get mortgage insurance if you do not refi and just keep the original loan. Just because a loan goes upside down does not mean the bank can change the original terms to now include MI when they did not include it originally. 3) If you do refi and pay mortgage insurance, you will likely need to call to get it removed. Even if you pay down to under 78%, because it has been more than 2 years (in 2013+) since the last appraisal (today) when you ask to have MI removed, the bank will require a new appraisal before changing the terms of the mortgage. So if the new 2013+ appraisal falls again, you are still stuck with paying MI. What I would do - if I can not refi and save cash with the same time-horizon, regardless of the interest rate, I won't do it. Do not forget to include tax deductiblility in your estimating. Generally mortgage interest is not wiped out by AMT adjustments for MAGI either.