Well, let’s see.  So far we have two options to help you, our borrower, refinance your adjustable rate loan into a fixed rate loan.  And so far, we are focusing our efforts for your Oregon mortgage refinance to finding a solution for an 81.5% loan to value loan.  We know you can stay under 80% loan to value and have enough to pay off your existing mortgage but you do not have the additional $6,400 left in closing costs.  We know that if you borrow enough money to pay off your adjustable rate mortgage plus all of the closing costs, you will end up owing 81.5% of the appraised value of your home.  This means your lender will require mortgage insurance and that premium will run $78.30 per month or $939.60 per year.  So we looked at the option of having your lender pay 2% of the loan amount in closing costs.  This way you are able to avoid mortgage insurance, but will end up having to pay .5% higher interest rate.  Are there any other options?   

            How about this one?   Let’s keep your new Oregon mortgage refinance at 80% loan to value, which in our example is $341,600.  Then let’s add a ‘no closing cost’ line of credit 2^nd mortgage for 10%  of the appraised value, which will be $42,700.  This new HELOC (home equity line of credit) works much like a credit card, but with a much lower interest rate.  You will have $42,700 available to draw against.  Almost all HELOCs are based on Prime Rate, which is currently at 8.25%.  Based on your credit score, and subject to your ability to income qualify, I can get you a HELOC with an interest rate of Prime Rate plus 1%, which is 9.25%.  At the time we close your new 1^st and 2^nd mortgages, you can draw against the HELOC to secure enough to pay the $6,400.00 you were short in closing costs.  HELOCs generally require monthly payments equal to the interest on the amount drawn, although you can pay it down or off any time.  I would recommend a HELOC that allows you to make draws and pay interest only for the first 10 years, and thereafter the balance owing will be amortized over 20 years.  The new payment for a draw of $6,400 for closing costs will be $49.33 per month.  This way you can secure your 1^st mortgage at the lower 6.25% interest rate. 

          Keep in mind that HELOCs are adjustable monthly.  Any time Prime rate moves up or down, the interest rate on your HELOC will move with it.  The interest rate cap (the highest interest rate they can go to) on your HELOC is 18%, so you do have a risk and should manage your credit line accordingly.

            Fortunately, the HELOC I am recommending is a HYBRID HELOC.  This allows you to make a few large draws against the credit line and request that the interest rate on that portion be fixed at the same rate Prime plus 1% rate.  You may decide you would like to draw additional funds at the time you close to pay off credit cards, to use for a vacation, or any other reason you may have.  If you want that total draw to be at a fixed rate, it is your option.   

          So now we have one more option for your Oregon mortgage refinance.  Next time we will consider how your individual needs may influence which option is best for you.  At www.OregonsBestMortgage.com, your individual needs are my first priority.  Whether this is your first Oregon home mortgage or your 20th, I want you to end up with the option you are most comfortable with and the one that works best for you over the long term.