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Michael O\'Riley Asked:

Three years ago I purchased a home with an 80/20 loan. I automatically went to a bank soon thereafter to set the terms of the 20 into a 15 year mortgage at over 8 percent. The 80 is still interest only due to set at as an ARM in two years. The house was purchased at 335, 000 but on current mean estimates like Zillow is currently at 311. I obviously have little equity in the house. I am wondering if I can refinance the 80 into a payment that will not be too much higher than what I currently have. I am not having trouble making payments and could afford higher. My credit is excellent, but I am beginning to consider options at this point. Thank you. [Colorado Springs CO]



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Answer Provided by: Scott Young [05/08/2009]

Hi: In order to refinance your first mortgage, the second mortgage holder must agree to subordinate, that is, hold the second mortgage in place while the first mortgage is refinanced. If Zillow is accurate, and many times it is not, then you are "upside down" i.e., you owe more than the house is worth. Hopefully, that is not your situation. What are the loan balances on your first and second mortgage? Is the same company servicing both mortgages? Also, have you made any upgrades to your home, such as finishing the basement, remodeling the kitchen, adding a bathroom, etc? If your value is high enough, then I can do an FHA loan for you, combine both of your loans into one, fixed rate loan, and get you away from the ARM and the higher interest rate you are paying. Please advise on my questions, and we will see what we can do for you. Best Regards, Scott Young, Blue Sky Mortgage Group, Inc.