Scenario: I have gone for a home purchase a year ago and have 2 adjustable rate mortgages. I'm just hoping that I can combine both the loans and then refinance. What do I need to do or be informed of? I would first talk to the bank that offered me the previous loans, find out what they can offer. But will they send me appraiser since it's been a year over the purchase date that I have had an appraisal done. And, if you need some more info, we added some cabinets in the kitchen and also a shed in the yard. Also, my credit score is in between 650-680 and the balance that's yet to be paid is $150,000.



Solution: First of all, the bank or any lender will not ask you for an appraisal until and unless it has approved your refinance loan and started off the loan process. And, secondly, it's better to have an appraisal done because an appraisal holds good only for a period of 3 to 4 months after it has been carried out. So, you can surely have an appraisal done prior to refinancing your combined debt.

The appraisal will help you to determine the current home equity because if it has increased, then there's a possibility that you can qualify for a better financing program as compared to your combo financing. There are a few factors like the credit score, monthly debt payments etc that will decide the advantage that you may get from such programs. But what's more important is that, as a borrower, you should be careful of what the fine print of the program says. That's what is going to ensure that you benefit from the program in the long run.

Now, considering that you have two ARMs, I guess it's been difficult for you to cope up with increasing payments. So, you may opt for a fixed rate loan with an interest-only option in case you do not wish to stay in the property for a long term. However, you should go shopping for a mortgage loan and enquire about the rates and the loan fees that you will have to pay.

Regarding the costs of refinance, you may find lenders who are willing to pay the costs on your behalf. The costs are actually added to the loan amount. But this is possible only when there is sufficient equity in your home. And, if your loan amount to home value is about 90% or slightly less, there's a possibility that the lender is paying for your closing costs. But in return, he may charge you a slightly higher rate of interest in order to retrieve the costs. So, what you can do is request the lender for a buy-down of the interest rate so that you can pay less on a monthly basis.

Regarding the appraisal that you've asked for, I feel you should get it done. This is because it will give you an estimate of the home value within a snapshot of time. There are homeowners who go for an appraisal from time to time just to keep a track of the changes in their home value. It's a smart way of keeping a watch on your biggest asset if you wish to refinance to use your equity for home repairs, debt consolidation and vacation purposes.

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