I have 80% 1st and a 15% 2nd...

[ShaneMcKenna 0]

Hey I just got into my first house in Feb. of this year. I have an 80% 1st and 15% 2nd, and put 5% down.

Right now I am only setup to pay Interest on my 2nd mortgage, but I want to get some kind of a plan to pay down, and eliminate the 2nd loan.

 

My house was appraised for $14,000 higher than what I purchased it for. Plus I put down $10,000. In theory now I have 24,000 equity in the house correct?

 

IF I refinance, I can use that 24k as part of my first 20% right?

 

The house is valued now at 180k. 20% of that is 36k. Minus 24k equity is only 12,000 I would need to bring to closing to elimnate a need for a 2nd, correct?

 

Would that be the better approach and paying refinancing costs vs over paying on 2nd loan for the next 3 years?

Thanks, Shane

[MichaelC 160]

My house was appraised for $14,000 higher than what I purchased it for. Plus I put down $10,000. In theory now I have 24,000 equity in the house correct?

In theory, yes. But that doesn't always translate into $$ in your pocket, Shane. You can't assume you would receive full appraisal price from a buyer and, even if you did, there will be closing costs associated with the sale. So keep that $24K equity in perspective.

Are you asking if you should refi the property with one new first mortgage, thereby eliminating the small second? If so, there are a number of missing variables that would affect the answer to that. For example, if you refi, is there a prepayment penalty on either note? What are the terms of the existing mortgages? Etc.

Best advice is for you to speak with a few mortgage brokers and run by them the details of what you are trying to accomplish. Have them put numbers on paper so you can see your bottom line. Then, make an informed decision.

[ShaneMcKenna 0]

That is my next step, is talking with my current mortage company, and then from there pricing a few others out on refinancing. It just sounds funny I want to refinance and I've only been in the home for 6 months.

 

I know for a fact there is NO early payment penelty on the 1st or 2nd. My main goal is not cash in my pocket, it is to eliminate the need for the 2nd mortgage, or setup a payment plan to overpay on it and eliminate it that way. Right now I am just paying Interest on it, and that does not take anything off the $23,000 principle.

 

So my options are overpay $500 here and there, and in time, that $23,000 will be gone. But in the mean time I am paying $225 a month to borrow that $23,000. I was interested in tapping into my existing equity in the home and using that as part of my initial 20% and then paying off the rest with cash.