One of the highlights of the CalSTRS 80/17 home loan was that the second mortgage allowed you to buy with only 3% down and no mortgage insurance. Add to that the fact that the payments on the second mortgage did not have to be made for the first 5 years of the loan!
Since interest rates have plummeted to historic lows in 2012, what was once the CalSTRS 80/17’s greatest benefit is turning out to also be it’s biggest challenge.
We’ve talked about some of the limited options for refinancing an 80/17 in the past, and now we’re starting to see some success stories. Here is one recent story I would like to share:
Current CalSTRS 80/17 Loan
Original 1st Loan Amount: $404,000
Payment: $2,231.00/month payments not including taxes and interest
2nd Loan Amount after 5 Years: $108,400
Payment: $649.50/month payments to beginning 2016
Interest Rate on Both Mortgages: 5.25%
After 5 Years, Mona’s total mortgage payment would have been $2,880
After Conventional Refinance
New Conventional Loan Amount: $504,000
New Total Payment: $2,298.50/month not including taxes insurance
The end result is that by paying off the 2nd mortgage early, saving the accrued interest on the second mortgage and combining both loans into a new, non-CalSTRS conventional loan saves Mona $581.00 a month!
Refinancing now reduces payment $581 a month!
Mona did have to purchase private mortgage insurance due to having less than 20% equity, but even with that she still lowered her payment substantially. Bottom Line
If you are in a CalSTRS 80/17 and have questions, there may be options. If you have any questions or would like me to run the numbers on your loan, you can leave a question or comment below or contact me directly. My information is in the author box below.