Hello, my prepayment penalty clause is up next month & I am trying to figure out if I should refinance for a lower payment or stay as we are. Here are the facts: I have a 7.9% interest rate on a condo which I rent out. I am in So. Florida & since the taxes are so high I am neg. $179mnth. I am trying to get the rent increased but it's a plan8 unit (government help)& they froze the increases. I owe $113,000 on it purchased it 2yrs ago on a 30yr loan. I figure, if I refi. I will have to pay closing costs approx. $6k & would bump me up to $119k. How do you do the figures? Is it worth for me to refi? Is there any company that would do no closing costs?
All your suggestions are appreciated.
thanks.

To see if it makes sense, answer the following for me:

Original Loan Info:
1. What did you pay for your property 2 years ago?
2. What was the original loan balance when you bought the property 2 years ago?

Proposed Loan Info:
3. What is the est. value of your property if you were to sell it today?
4. Give me the separate #s for the tax, hazard insurance, & condo dues.

Regarding the "no closing cost" loan...it's a marketing gimmick. Any lender can do it and it does serve a valuable purpose for the right borrower, but some lenders just shamelessly advertise it like it's some magic pill that only they can offer.

Anyway, here's how it done - the lender simply raises your interest rate above the market rate, which then generates a rebate. This rebated amount is then applied to your non-recurring closing costs (broker fees, lender fees, title fees, credit and appraisal fees), and "ta-dah" there's your "no-closing cost loan."

Please note, you cannot rebate your recurring closing costs - property taxes, homeowner's insurance, & pmi.

The only time I generally use the rebate option for the borrower is on a purchase transaction, where the borrower has limited savings, and the seller assist and gift money fall short of what we need to close.

For a refi, if you are financing the closing costs, it's generally better to finances the costs into the loan amount and not the interest rate.

Damon Di Placido
Wachovia Mortgage
damon.diplacido@wachovia.com

Placido, we purchased the unit @ $115k, 100% loan. Its current value is $200k, taxes are $2600 insurance is paid w/condo fees which are $70mnth.

Purely for example purposes, here's one possible loan scenario using today's market rates.

New loan of $119k @ 6.750%, w/ 0 pts, 30 yr fxd = $771.83/mo P&I

If we compare the above scenario to your current loan, you will save an est. $64/mo

So to answer your question of "does it makes sense to refi since you can't raise rents?", well, it depends. Will the extra $60'ish /mo in savings make a huge difference in your situation - maybe , maybe not?

Also, how long do you plan on owning the place? If it's long enough to recoup the refi costs, I'd say probably. Also, if it is a long term investment and you do wish to refi, you may also want to consider paying a point or 2 to get an even lower rate as your LTV is low enough. Please note, if you do pay points and you want to finance it into the loan, you'll need to raise the loan amount to cover it.

Disclaimer: The rate above was based on a Non-Owner Occupied/Investment Property. Please note, this is not an offer to make a loan.

Damon DiPlacido
Wachovia Mortgage
damon.diplacido@wachovia.com