Posted by Nate on March 15, 2001 at 08:53:34:
One other thing to consider: with so little equity, your LTV is very high. If you’re planning to refi, make sure you can get a refi for that amount!
NT
Subject to deal. Refinancing possible? - Posted by Mark - Seattle
Posted by Mark - Seattle on March 14, 2001 at 16:38:45:
Hi folks-- I have a deal where the seller has little or no equity and I’m considering buying subject to existing financing. The complication here is that the loan is an ARM going up VERY steeply every six months less than a year from now. My questions: can I refinance once I buy the home? How long do I have to be on title before refinancing?
Also, seller’s equity is small, under $6000. How do I go about getting permission to subordinate the seller’s second? Finally, if I get a tenant in sooner than closing date set, can I close early? Is so, how?
I appreciate any help you all can be.
Thanks,
Mark
Re: Subject to deal. Refinancing possible? - Posted by JPiper
Posted by JPiper on March 14, 2001 at 23:13:41:
I’d say the rule of thumb is that you’d normally need to be on title for one year to refi. Otherwise, the bank will use the lower of purchase price or appraisal.
But I’m puzzled as to why you would be worried about an ARM in the current climate. In case you haven’t been reading the news, the interest rates have been going down! The only ARM I can see going up at all is one that’s coming off the first year teaser rate…but it’s only going to market…which right now is quite low.
You may be looking at the MAXIMUM an arm can adjust. But the adjustment is driven by the spread between the index controlling the arm, and the rate. The index could be the libor index, a cost of funds index, a treasury index, etc. If those indexes don’t jump by amounts equal to or higher than the “cap”, then the rate will not move the maximum.
Not that any of the above should necessarily make you feel more comfortable. Rates could always rise. But certainly making the statement that your ARM is going to jump sharply next year doesn’t sound right. I’d read your documents again.
Make sure there is a clause in the second that permits subordination. I’d check with your attorney or title company for any special rules according to your state beyond this.
JPiper
Re: Subject to deal. Refinancing possible? Thanks - Posted by Mark - Seattle
Posted by Mark - Seattle on March 15, 2001 at 03:42:44:
Thanks for your perspective, JPiper. After reviewing the documents I realized I was viewing it incorrectly. If the economy continues to be sluggish, I may be able to avoid the prepayment penalty on the loan too(forgot to mention that). I appreciate the input.