Question about refinancing

Financing, Hard Money Lenders, Private Money
1

I have a question about refinancing. I think I understand the basics but not sure. Here is a little background first… I recently closed on a property were my current mortgage payment on is a combined $1242.09 a month. By combined I mean I took out a 80/20 then a second loan to cover the other 20%. Both the loans are interest only loans and I can’t refinance for 36 month’s with out being charged a prepayment penalty. I don’t recall off hand what the penalty is. Also because I basically put no money down, I am negative cash flow with this property of about $100 a month. I got a letter from a refinance company (like everyone else!) showing how much my monthly payment would be if I refinanced my loan at different dollar amounts. $100K loan would cost me $322.00 a month, $300K for $900.00 a month and so on. Now my question is in two parts…

  1. Is it really has clear cut as all these fax’s, letters and phone calls I get from these companies? Will that new monthly payment be in the ballpark of m y new loan depending on the interest rate and length of loan? Or is it totally off?

  2. Since I am negative cash flowing annually of around $1200, would it be wise to refinance and take the prepayment penalty depending on how much I will be penalized. That way I will be positive cash flowing and potentially only out slightly more money then the $1200 I know I will be?

I hope I stated this clearly enough to get some good feedback with regards to this topic. Thanks for all the help!

2

To roughly estimate your pre-payment penalty calculate 6-months worth of interest.
Eddie

3

so many questions… :o

To answer question #1;

Those great rates that they advertise are just that, an advertisement. On most ads, if you watch the disclaimer it will quickly display “based on credit score of 700+ and LTV of <75%” These “teasers” are for low LTV Rate and Term refinances which are low risk in the eyes of the Lender.

To answer question #2;

It appears that you have not been in this mortgage for very long…less than 2 years? I am sure that your property value has not increased tremendously in this same period. This would mean that you would need to probably come out of pocket again if you refinance.

4

Best Wishes,

Mike Siehien