Ok. I'm thinking about a cash out refinance with no escrow requirement and i'm interested in understanding how this (cash out & no escrow) will effect getting the lowest rates.

Here's my scenario:
High credit scores
Current mortgage (1 year old)- 52% LTV (based on appraisal from 11/2007) - No escrow
Looking to get 10K out for home improvements (have estimate) would bring LTV to 56%LTV

Current lender quoted me 4.875 0 points on 12/17/2008 (with cash out & no escrow), I did not bite then and I am being told that they have been repricing for the worse since then?

Any thoughts?

Hi Michael,

Depending on where you live, that appraised value could be drastically lower.  I would definitely research current market values before doing anything, but based on the scenario you have described, pricing has definitely fluctuated since 12/17/08.  Hold tight though, we are expecting rates to get better after January 13th.  I would get the process going with the broker or lender so when rates do improve, you won't be scrambling to get paperwork together and possibly miss a great opportunity. 

Thanks,

Chris

Your broker did a good job. 12/17 was the low point of the year and we have climbed since. Your loan to value and cash-out is going to get you the best rates. You don't need to worry about effecting your rate until you go over 75% so if you want more cash go ahead, your rate won't be effected. I'm also assuming this was a 30yr fixed loan not a 15 year.

And yes, hold tight into next week and let your broker know what rate you want so when they see if they can lock it in.  With lower rates also come much slower turn around times because of the increased volume. So get your paperwork and application together so you don't get bogged down in the process later and lose the best rate because you need a longer lock.

Happy New Year.

If you are planning on being in the property for more than 5 years, I would also consider paying points and getting a lower rate.  Over time, you will save more money from lower monthly payments than it cost you to get the lower rate.

Hey Michael, you definintely need to get an updated appraisal before paying for anything else.  I am in southern CA and I have seen some previous clients who were at 50% LTV in 2007 and are now at 90-100% LTV.  Especially if the last appraisal you had done was an aggressive one.  Don't go by Zillow, check with a local appraiser - they can usually even do free market estimates before going to property.  What area are you in?

Zach Hardin

Thanks very much for all responses, much appreciated. To answer your question, I live in Hartford County CT. I agree that the true LTV will not be know until an appraisal is performed, that being said the LTV I mentioned of 52% is based on our purchase 1 year ago (of which the purchase price was heavily neogatied down and improvments have been made since). Let's say I have at least 65% LTV; How will NO escrow requirements and 10k cash out effect geting the best possible rate? The reason I ask is that my current lender (direct retail bank) mentioned that as of Jan 1 the bank is 'charging a bit' for cash out refi (let's assume with 10k cash out my LTV is less than 70%).

It sounds as though your local bank will be servicing the mortgage due to the fact that they have changed their charges for cash out as of Jan 1.  This is what is known as a portfolio product and would not be subject to the same pricing hits as a loan that would be sold to Fannie or Freddie.  If it is a portfolio product, the only place you could obtain the information you seek is from your local bank.

At your loan to value there shouldn't be any adjustment for cash-out. And the normal fee to not escrow is .25% (1/4) of your loan amount, so nut much at all.  If anyone is adjusting for cash-out it may not be true and they just want to make a little more money.

Private banks on the other hand don't play by the same rules so your loan officer could be telling you the truth that there is an adjustment for - but there wouldn't be in the broker market.

And anything less than 75% won't have an adjustment for cash-out.

Of all three appraisals I have ordered from the Hartford, CT area in the last 6 months, not one of them has come in close to what the owner was thinking of in terms of value. Every appraisal has come in over 80K less than expectations on 250K+ estimated values.  I don't know what value you purchased your property for so take it for what it's worth.

Wanted to provide an update. We are closing today.

First off thanks so much to the MND community! Becuase of MND I was able to make informed decision through this process. We are closing in just a few hours and wanted to provide the details so others my utilize as a basis for comparision.

This was a refinance of our primary residence purchased just over a year ago (original note 30F @ 6.0).

NEW LOAN INFO - (same retail bank as original note)

30 year fixed (conforming) @ 4.875 No Points (locked on 01/15/2009)

8K Cash Out

No Escrow requirement (no taxes, no insurance)

Bank Fees (Total 800's of HUD-1) $827.50

800+ FICO Score

LTV - 57%

Appraisal came in slightly higher than purchase price.

Congratulations!!!  That's one heck of a deal if I'm recalling rates correctly from 1/15...seems like your bank is a bit of aggressive, which is good for you!!!