Rock and a hard place (what are my options?)

**manatbay** · 04-24-2011, 09:40 AM

My family needs to move the next town over, but our current home is 110% LTV so our options have come down to; (a) sell the house and cover the loss (expected 25k-35k) or (b) Rent.
Because we'd like to keep our savings/liquidity we've choose to pursue (b) which means we'd rent for $825 and pay a mortgage of $1450 per month (APR 6.375%). We've pursued using the Obama administrations 125% LTV program, but now realize this can be considered mortgage fraud because we are not intending on keeping this as our primary residence. After refinance the monthly would be $1260 saving us $190 a month which seems essential to me.
Payment with refi - $435 (difference we make up each month in additon to received rent)
Payment w/out refi - $625
We've talked about leaving (short sale / forclose) our first home, but we have decided it's important not to do that. Are there any other options out there short of paying down the loan?

It seems like we're between a rock and a hard place... Our liquid savings can be used to get a 4% rate on the new home which is going to save us a lot in the end, but that money could maybe be used to get this house refinanced as well...

A little more about this;
PMI on the loans are getting steep... 0.85% in most cases and above so in my case this is $170-$180 difference in addition to the rate increase of 0.75% to 1.00% which equates to $110-$150 payment difference.
Total loss/month to NOT put savings towards new loan: ($170-$180) PMI + Interest Increase ($110-$150) == $280-$330.
Total loss/month to NOT put savings towards old loan/refi: $190

**manatbay** · 04-24-2011, 02:19 PM

I've been crunching numbers and wanted to add these;

Before doing anything (refinance or buy new home here is where I'm at):
Net Mortgage Ratio 27% Front End Net Ratio
Gross Mortgage Ratio 19% Front End Gross Ratio

After not refinancing and just buying the new house:
Net Mortgage Ratio 36% Front End Net Ratio
Gross Mortgage Ratio 25% Front End Gross Ratio
I calculated the $625 of the second home mortgage into the front end (I know lenders would do it in the back end, but I felt more comfortable doing this).