From: bernard@sirius.gte.com (Bernard Silver)
Newsgroups: misc.consumers,misc.consumers.house,misc.invest.real-estate
Subject: Re: REALLY STUPID QUESTIONS ON REFINANCING
Date: 1 Oct 92 13:38:18 GMT
Followup-To: misc.consumers
Distribution: usa
Organization: GTE Laboratories Incorporated

In article <1378@ncrclm.ClemsonSC.NCR.COM> lsnow@ncrclm.ClemsonSC.NCR.COM (Linda Snow) writes:
   I've bought and sold several houses but I've never refinanced one and
   I'm REALLY ignorant about how it works.  I know that if I do it I'll have
   to deal with a bank or mortgage company and they can answer these
   questions, but I'd like to at least get a vague idea before I start.

   1. DO YOU NEED A CERTAIN EQUITY LEVEL TO REFINANCE?

   Seems like I've heard mention that you do.  And if so, why?  If they were
   willing to give me a 95% loan the first time, why not again?  Isn't this
   process pretty much like selling your house and buying it back without 
   moving out?

Yes, different lenders will require different levels of equity.
It's done for their protection in case you default.  You
*may* find a lender willing to do 95%, but I think that that is a lot
less common now.

   And if the answer is yes, will they consider equity increases caused
   by appreciation?  In other words, if I only put down 5%, but an appraisal
   says my house is now worth 15% more than it was 3 years ago, does that
   mean I now have 20% equity for refinancing purposes?


They will do an appraisal, and use that as the value.  The original
purchase price is not used.  Appreciation will help (if house prices
have in fact gone up in your area!)

   Also, if I get this appraisal and can show 20% equity, does that mean my
   new loan (if I go through with it) will be without PMI?  (Even though I
   haven't contributed any more actual cash to this equity).

Yes, everything is based on % equity, given by the current appraisal.

   And I can assume, I suppose, that getting this appraisal, regardless of its
   results refinancing-wise, will cause my taxes to go up.

No.  Taxes depend on evaluations done by the city or town etc, not by
the mortgage company.

   2. HOW DO I GET STARTED?  

   How to find a reputable broker/bank/mortgage company?
   Should I use a broker?

Ask friends etc.  Or look in the Yellow Pages if that fails.

   Is it possible to "phone-shop" -- give info over the phone and get a
   good faith estimate faxed back to me?
Yes, usually.  (Actually, they will tell you rates for today, all
subject to change.)

   What information do I need in hand to start talking to the relevant
   institution(s).

Amount required, type of loan required, type of dwelling (single
family, n-family, condo etc).

   Once I get the daily interest/points quotes, what other things do I need to
   know that will influence the costs to me?

Closing costs, application fee, cost of locking in.

   3. WHAT ARE THE PRIMARY COSTS INVOLVED?

   I know that the closing costs involved are pretty much the same as 
   the original mortgage.  In what particulars do they differ (in general --
   I realize this may vary by state).  In terms of the impounds for taxes,
   insurance and interest, doesn't this kind of net out to zero when the
   amounts in my escrow account are refunded?

The same as original mortgage, as you say.

   4. HOW SOON WILL THIS PAY FOR ITSELF?

   My assumption is that if I take the amount I'm saving in monthly payments,
   adjusted for the extra taxes I'll be paying (due to lower deduction), and
   divided that into my closing costs, I'll get the number of months.
   Roughly.  Correct?

Yes, correct.  If you don't plan to stay that long, you could also
consider no-point, no-closing cost mortgages as I did.  You pay a
slightly higher interest rate (1/8% over 0point mortgage).   This pays
for itself straight away!  (As with the original mortgage, the
expected length of time before moving/refinancing is important in considering
the various point/fee options).

--
				Bernard Silver
				GTE Laboratories
				bsilver@gte.com
				(617) 466-2663
Newsgroups: misc.consumers,ny.general