Kec & Quirk, Lisonwal mentioned "$7,500 in closing costs"... but you need be aware of several things; Prepaid items (escrowed deposits for property taxes, and hazard insurance) add to the "cash required to close" but are not actual costs. The deposits they are replacing from the previous lender's servicing department are refunded generally within 3-6 weeks. NONETHELESS... many non-financial people look at their "bottom line" of their GFE and think "oh my God, that's "closing costs" ". NEXT; Lisonwal hasn't told what the buydown costs are for the interest rate they have locked. At a 5% coupon, depending on their loan-to-value, the loan size itself, their credit, and other factors, they may have a fairly sizable buydown included in their "closing costs." This is definitely not particularly a BAD thing, as it may have a breakeven point in their interest savings at a fairly short period. AGAIN; Taking a 30 FRM at "no points" or even "no costs" (when such a thing was actually available) is the MOST expensive money you can borrow, and hardly conservative in most cases. LASTLY; In the current mortgage meltdown environment, the back-end bond buyers are refusing to buy loans at enough of a mark-up for the lending banks to advance ALL the cash costs of the transaction itself. The bond buyers are offering a maximum of about 1.5% of a closed loan, while the actual costs run about 3-5%, with a cash minimum around $3,500+. Because of this the "no cost loans" of the past are... in the past. Folks who have sufficient equity to have their closing costs financed are still able to do so... but there are no "free" mortgages (beside the obvious TANSTAAFL reality.) Besides... lender-paid loans only made sense when rates still had the potential to drop lower... so taking the inflated higner interest rates that were offered in order to have the bank pay all the cash costs was something people would do on a speculative basis. No longer is it financially intelligent nor realistic to take a higher interest rate (simply in order to get it for "free") with the argument that you are saving yourself the ability to once again refinance when rates drop in the future. Cheers, Dave Donhoff Leverage Planner

Hi Eosinophil, FIRST of we need to back away from the minutiea... up, up, up to get some bigger picture perspective, like an architect starting with very simple pencil sketches on a blank piece of paper... so that we can THEN come back down to the nitty-gritty and micro-fit the situation to your specifics. What is more important to you; Eliminating your outstanding leverage balances on an accelerating basis, or stopping the monthly bleeding? (These are at counter-points for you currently.) Are you more concerned about the balances on one property versus the other... or about your overall family position on balance? How much accrued liquid cash reserves do you have socked away? How much is your gross family monthly revenue? How much is your current gross (including minimum payments for all debt and homes) family cost of living? You are paying to rent the money you are using for retaining the ownership of the old home (the interest costs.) This interest is a "sunk cost" each month you pay it, if you have no tenants paying you for its useage. Is your continuing ownership giving you *any* appreciation currently? (Keeping in mind that market appreciation is a VERY tentative guess, at best, in the current environment... and if it is negative, you need to honestly figure it that way as well.) IF so, how much is the appreciation when calculated into monthly dollars? How much of your sunk interest costs are being ofset by your potential monthly appreciation gained? Whatever your sunk costs of interest, minus your dollars from appreciation (or plus the dollar costs, if depreciating currently,) is what you can call your "monthly burn." This is the consumption of your net worth you are incurring to continue carrying this property. NOW... this home CAN be sold (gotten under contract with a 30 day escrow period, or less) within a 2-6 week marketing time, AT SOME LEVEL OF PRICE, AND ADVERTISED EXPOSURE. This "price level" is what we call the "quick-sale price value." If your agent were to (honestly) determine the realistic quick-sale price level in that local market... it would likely be lower (perhaps much lower) than where you are holding out right now... and the agent would likely need to ramp up some significant marketing costs... which they might only be comfortable doing with some funding (or guarantees) from you. All of this, naturally, is going to be a revenue burden off of what you were previously hoping to sell your home for. NONETHELESS... this is a numeric exercise that is CRITICAL to do... RIGHT NOW... because it will give you the numerical difference between where you are right now in realistic net worth, were you to do this immediately..... VERSUS how much you are "burning through" on your monthly burn rate if you simply close your eyes, cover your ears, pray really really hard, and just keep waiting it out. KNOWLEDGE AND AWARENESS IS POWER... and you can't make an objective financial decision unless/until you have the actual facts in front of your face to review and think about. ========================================================= OK... soapbox aside..... *IF* you decide that you have reason to believe that simply waiting longer will actually be worth your while in a higher sale price... then there *is* investment property financing available in the range of 3.5% to 4.5% APR, on an interest-only basis, up to 70-75% LTV, strictly on a fully documented (income, employment, assets) basis... which could very significantly reduce your monthly burn overall. Its something I have at my firm... but not to be 'spammy' there may be other brokers (perhaps your regular loan broker) who have it as well. Its not a retail program, so you'd definitely need to connect with your broker for it. ========================================================= ALL THINGS CONSIDERED... (And in truth, we haven't seen enough details to truly consider all things...) I would *PROBABLY* be leaning toward advising you to take a deep breath, swallow hard, plug your nose... and have your agent re-price the home to the local quick-sale price... and get it over with while we're in the summertime "moving & home-buying season." All the best! Dave Donhoff Leverage Planner

Billl, yes you ask some good questions about plans changing. That's always something to consider, in any endeavor one embarks upon. The credit card, by the way, I already mentioned would be paid off before doing a refi. As for 70% ROI, actually, a number of the trades will be done by us (sweat equity). If we were completely contracting the build out, it would be closer to $140, so I actually considered the 70% ROI when estimating the after-build value. Additionally, though you didn't ask about our particular market, the property is just a couple of blocks from the ocean. The main house has a very nice view, and thus enjoys a preimium in value (and even in this down market, I get unsolicited offers to sell). And the new apartment would have a 270-degree, unobstructable view, again adding a premium that I'm not counting on, but know it's there. If house values continue to stagnate, which is a very real possibility, we can choose to rebuild equity by taking the rental income and using it for accelerated mortgage payments. Your first comment, "I guess some people never learn..." Well, I'll take that with a grain of salt. I too am frustrated by the economic mess. But I also know that to get out of the mess, those that can move forward with building projects, business expansions, and other entrepreneurila activities will be those that are part of turning things around. On this project alone, I would be putting two laid off friends to work (both skilled building tradesmen) for about 4 months. That in turn keeps them able to pay their mortgages. And when neighbors stop by to see the construction project, maybe they'll think of projects at their homes that need doing (especially when they see the quality work these 2 guys do)! And then maybe these guys have enough work so they're making a living again and their homes are not in jeopardy. So maybe they'll buy some new tools to expand their business capabilities, and it continues to spiral upward from there. Just think if people started thinking that way for a change instead of waiting for everyone to wait for someone else to fix the economy?

Hi Laurie, I guess I am not sure how to go about getting the best rate, etc. At any moment in time, pretty much everyone has the same (or very similar) access to the market rate structures. The major difference (to you) is that mortgage brokers are required to fully disclose the actual underlying wholesale rate structures, while retail bank loan officers can hide them and "mark up" the rate you actually get to lock. Comparing "quoted" rates before you have your appraisal done & are ready to lock is futile, because even if the loan officer you are asking is being truthful, the underlying lockable market rates can & do shift literally daily (sometimes hourly.) The *BEST* way to get the absolute lowest available rate at the time you are actually locking is to use a mortgage broker who will agree to a flat/fixed fee, and show you the actual wholesale market rates you can choose from at the point of rate lock. Could you expand on what you said about having the financing properly structured? Sure. There are many ways to unintentionally get yourself locked into paying much more of your money out to the bank, and losing what you could have been gaining. Here's a very vanilla & simple example; Some people take a 15 yr FRM loan in the belief that it is better due to a lower interest rate offered. They may save 1/4% or even 1/2% in mortgage interest in doing so. Unfortunately, this also increases their amortization burden (a higher payment, with more money going into the actual real estate equity.) The amortized funds COULD have been accumulating in a compounding tax-advantaged growth account, and almost always at a higher rate of growth than the apparent interest "savings" from the paying down of the mortgage. Further, the starving of cash away from reserves and growth accounts by sending the money against the mortgage also means that a responsible family has to carry (and pay for) more insurance coverages... because they don't have the liquid reserves to be able to safely increase their deductibles and take more lenient terms (which then drops their insurance premiums.) Lastly, the money that gets directed into the real estate (against the mortgage balance) is money that is *NOT* growing the family net worth at all. It secures the one-time saving of interest (which counts, no doubt,) but it doesn't have the compound growth of funds growing alongside (but not INside) the real estate. Of course, there are lots of variables in the above explanation, and frankly a lot more that aren't even detailed out here. Ignoring these *WILL* cost the average homeowner tens of thousands (if not hundreds of thousands) of dollars more than they had to pay, over time. Hope that helps, Dave Donhoff Leverage Planner