Conference nyoss1::market_investing

    
    I heard the following on CBS world news :
    
    If you have lived in the place for 2 years, and
    the difference in interest rate is at least 2%, and
    you plan to stay for at least 2 more years, go ahead 
    and refinance.
    
    Please donot ask me what is the rational behond this 
    rule of thumb.
    
    -Santosh 

    The rationale is relatively simple. If say you have a fixed term
    mortgage on say 100,000 at 10% that is roughly 10,000 interest per
    year. If you get a new mortgage at 8% then the interest would be around
    8,000. Closing costs will probably be about 4,000 so your break even
    would be 2 years, 2,000 less interest in each of the first two years on
    the new mortgage. This is using simple math not the complex
    amortization tables which could be calculated and wouldn't give much
    different results. It may work out to about 25 months or 23 months or
    something close. It also depends on your closing costs and wheather you
    have to pay any discount points or not. Each discount point equals one
    percent of the amount being borrowed. The information that you want to
    find out is: What will the closing costs be, and how many discount
    points on the front end of the new mortgage. Add these two numbers
    together for your total costs to convert to a new mortgage. Find out
    what your new payment is and subtract that from your old payment which
    will give you your monthly savings. Divide monthly savings into the
    total costs to convert to a new mortgage. That number is the number of
    months it will take you to break even, or said another way you won't
    really start saving any money until after that number of months has
    passed. If you really want to get accurate, you would have to calculate
    the present value of the total closing costs to convert but that will
    not change the answer by more than a few weeks.
    
    I hope this helps out.
    
    Randy

All this is assuming the fact that you have enough equity left in your
house to cover the new mortgage.

Try refinancing if you live in Southern NH and bout about 5 years ago. :^{

-andy

    RE .3
    
    Our refinancing appraisal indicated that our home has dropped 28%
    in value since 1987, when we bought.  Why are bank appraisals always
    lowballed? what's in it for the bank?
    
    PBM
    

In this economic climate, the appraisers are being told by the banks to be 
conservative (probably very conservative).  This is because almost every bank 
has been stuck with overvalued property, so they'd like to be realistic.  They
learned the hard way they might have to accept the fair market value in cold 
hard cash at auction.

If it's a condo or a specialty house (ours is a log home), it's even worse.

Elaine

RE:.4 by CIMNET::MOCCIA

> Our refinancing appraisal indicated that our home has dropped 28% in value 
> since 1987,  when we bought.  Why are bank appraisals always lowballed? 

You didn't mention where this was,  or what kind of a property it is.  More 
than a few people would be very very happy with 72% of the 1987 price:  Some 
condos near where I live in Merrimack,  NH have sold for less than 1/3 of the 
1988 price.

Thursday's Nashua Telegraph shows that of 13 condo sales in the local area
a bank, mortgage company or a federal agency was the buyer or seller 9 times.

In Merrimack,  the FDIC 'bought' unit 104 Harris Pond and Beneficial Mortgage
'bought' unit 63 of The Commons.  One other condo sale.


> what's in it for the bank?

Ever happen to walk by a bank as the FDIC walks in?  It's a unique experience!
Usually happens on Friday at closing time:  I'd bet it doesn't make a banker's 
weekend.


Phil

    Appraisals are often, as we've found out, simply a matter of which side
    of the bed the person doing the appraisal woke up on. We bought our
    house for $318K in July, 1988. Over the past year, we've contemplated
    refinancing a few times. Appraisals during that process came in as
    follows:
    			3/91 - $302,000
    		       11/91 -  225,000
    		        1/92 -  287,000
                        2/92 -  318,000
    
    We know our house is worth much more than $225...We also know that we
    could not even dream about getting $318 for it today. We refinanced
    with the $318 appraised value (such a deal).
    
    Appraisals are a value judgement, and IMHO more subjective than
    scientific. Prior to the appraiser showing up, clean the house, perk a
    pot of coffee (for fragrance and a hospitality measure), and have a
    smile on your face. 
    
    BTW, the 11/91 appraisal was done by a firm hired by the DCU. The 1/92
    appraisal was a "re-do" of the 11/91 with THE SAME company after I
    provided them with comps that were of homes much more similar to ours
    than they used in 11/91. What a hastle. DCU was hostile and
    uncooperative stating that "everyone thinks that their house is worth
    more than it actually is" (a generally true statement). Our refinance
    was not with DCU.
    
    Steve.

    I recently made a stab at refinancing, only to find that my appraisal
    would not support my current mortgage.  What I was trying to do,
    however, was to refinance my current 5 year old 30-yr mortgage @ 9.75%
    for a 15-yr, 3 yr ARM beginning at 7.5%.  The amortization showed that
    I would increase my monthly principal amount X 4, yet only increase the
    monthly payment by $50.  Although I was not able to get it, I would
    suggest that anyone looking at refinancing review a 15 yr note.

    We have a 24X36, 1 car garage, 6 room-2 bath cape on 2 acres in 
    Goffstown, NH. As it turned out, our major issue was that we did not
    have enough equity in the house to refinance (bummer.) 
    
    We probably still don't have enough equity, but have some cash we could
    utilize to make up the difference. But, the question has now come up
    whether we should refinance (and keep our extra cash invested) or take
    the opportunity (sic cheaper home prices + lower interest rates) to
    purchase a larger house. Anyone have any thoughts on this or feel for
    how to calculate the tradeoff between  the 2? 
    
    For example, to sell now, we would probably loose $30,000 (we haven't
    had the house appraised yet, but that seems to be the norm.) We might
    just have enough for a downpayment on a new house. However, we would be
    getting a larger house for cheaper than we would with higher interest
    rates or higher prices. On the other hand, I'm not sure how much
    further ahead we would be in the long run (considering we want to get a
    larger house sometime in the future) if we just refinanced.
    
    				James

    FWIW
    You can refinance 95% of current market value at most companies
    Recent appraisals are, on the average, much higher than you think.
    The appraisal company sees your loan app. and you can 'force' a
    higher appraisal by asking for 110% of your current principal. The
    appraiser doesn't want to look like a complete idiot and only come back
    with 60% and thus loose business for the finance company and the
    finance company is mainly concerned with your credit history. So you
    might consider asking for 10% more than what you owe. If it doesn't
    work you're only out the appraisal fee which is approx. $200.

    Hi,
    
    I'm a bit confused. You stated that "you can 'force' a higher appraisal
    by asking for 110% of your current principal." to whom am I doing this
    asking? It seems as if you are saying that I should be asking for a
    mortgage on my current house when I thought you asked for mortgages on
    your not yet purchased house??? 
    
    Also, I thought the appraisor was for the new home mortgage. So why
    would they loose business if I'm asking for 110% of current principal
    as there is only current principal on the home I would be selling???
    
    				James

    Hi James,
    
    Long time no see!  Are you still doing COHESION stuff?
    
    We were in a similar situation last year.  We cann't decide should
    we refinance or buy new.  We ended up refinancing.  We like to have
    some money left in the bank for emergency.  If we buy a new and
    larger house, we will have no money left (all money will go to
    the down payment) and plus a larger monthly payment.  If we
    refinance, we will have a smaller monthly payment and still
    have some left over money in the bank.  Although we would like
    to have a bigger house (who wouldn't), but the size of our current house 
    is still adquate for our family.  Also, our town has a good school 
    system.  There is no immediate need for us to move.  I know
    the mortgage rate is very attractive.  But with the economy is
    so slow and job market is so bad, the last thing I want is more
    debt.
    
    Wendy    
    
    

      Don't  forget  the  real estate commissions.  This will reduce the
      amount you  realize  from  the  sale  of  your  existing  home  by
      something  like 7% of the selling price, unless you sell withoug a
      broker and/or negotiate a lower rate.  
      
      My  feeling  is that if you don't have enough equity to refinance,
      then you don't have enough equity to "trade up". 
      
      I  don't  know  your  overall  circumstances, but some people in a
      situation like yours might actually consider  "trading  down".   A
      lower   mortgage   at   a  lower  interest  rate  could  give  you
      considerably lower payments and/or a considerably shorter mortgage
      term.

      Based  on personal experience, I agree with the previous note that
      suggesst your appraised value may be higher today.  Perhaps 10-15%
      or  more  than  2-3  years ago.  If you haven't had a re-appraisal
      recently it might be a good investment.  

	7%  ????????????? are you serious??????

	I thought  our  1.5-2% was a rip-off!!!!!!!!!!!

	Heather

    6 - 7% commission appears to be normal practice.  I've seen 'discount'
    places proudly advertising a 3.75% commission as if it were the
    greatest thing since sliced bread.
    
    Sometimes makes me think that I'm in the wrong business.  The broker
    who sold us our house sure had a nice new BMW...
    

6-7% is what brokers would love to get.  In Middlesex County MA, the "street 
commission" is 5%, for a home with a reasonably high asking price.

Of course, in today's market in this part of the country, with good homes
getting bids above their asking price, a broker's value lies mainly in 
escorting prospective buyers through the house while you're at work.

(My broker friend informs me that, with the recession, people hold on to their 
homes or rent them out, rather than sell them.  So there is less inventory 
from which buyers can select.  Therefore, good homes go for a premium.)

    Right, I sold a Middlesex County MA home last fall and expected to 
    pay 5% - but the broker lived on my street and gave me a "neighborhood
    rate" of 4% without my asking.  Later, I got the impression the 5% was
    negotiable town-wide. 
    
    A cousin in real estate in Baltimore was aghast; he said 7% was to
    going rate there.  

    Well I bought in Middlesex County MA November 1992, and the sellers
    paid 6.5%...
    

	This discussion really belongs in the RE conference but what
	the heck ....

	The commision is always negotiable.  If the agency doesn't
	want to give, go to the next one.  Usually an agency only
	gets 1/2 of the commision if it's a co-broker situation
	(and then the agent may not be getting even that 1/2, some
	may be going to the agency owners).

	A good thing to put into the contract is that if you find
	the buyer on your own, that you pay only 1/2 the % listed.
	The agent losses nothing because they'd be only getting
	1/2 anyways in a co-broke.

	Seeing I've never actually been on the selling side (yet)
	take the above with a grain of salt :-)

    Gee, I had no idea this would spark so much interest.
    
    Wendy, glad to see you're still with the company. I'm still doing some
    COHESION stuff, but I've broadened my focus to multi-vendor Software
    Engineering processes and tools consulting.
    
    I did place this note in the RE conference, but it's not getting much
    response. Also, I thought it might be appropriate for my question to be
    here because it is a question of how do I determine how to invest my
    money. Speaking of that original question, does anyone have any ideas
    on how I can make the determination on whether it is better (i.e. more
    cost effective in the long run) for me to refinance or buy a larger
    house given the current low mortgage and low house prices?
    
    				James