This article was originally published May 2012. At the time the original article was written, interest rates were still dropping, and home values were not on the same trajectory as they are today.
Today is a far different market, and with the lack of homes available for sale right now, home values have been climbing at an alarming 20%+/- rate since the beginning of 2013.
In today’s market, you may very well have earned enough equity that your options have opened up.
We have successfully refinanced many homeowners out of a CalSTRS 80/17. If you haven’t look at your options in the past 12 months, it might be time for a check up.
2 Ways to Refinance a CalSTRS 80/17
Combine 80% First and 17% Second Mortgages
This is really just about the math. Most education professionals used a CalSTRS 80/17 at a little bit higher rate in order to avoid mortgage insurance.
You have to realize a pretty significant drop in your interest rate to make sense of combining the first and second into a FHA loan – I would say if you have 5.75% or higher on your current CalSTRS 80/17 – let’s just run the numbers and see what they look at.
It either makes financial sense or not, this isn’t rocket science. Click here for an example analysis of an 80/17 CaSTRS consolidation.
Pay Down or Pay Off 17% Second Mortgage
This isn’t for everyone and it doesn’t necessarily require that you pay off the entire second mortgage. Three options are:
- Pay the 17% second down, or if your value has increased enough so that the total loan to value does not exceed 97.75% of the appraised value, you can look at FHA financing.
- Pay the second mortgage down, or if your value has increased enough so that the total loan to value does not exceed 97% of the appraised value and use conventional financing with private mortgage insurance. Ask about Community Access Teacher Loan
- Pay the 17% second off completely and use conventional financing with no mortgage insurance.
It’s all in the Numbers
What it really comes down to, and I want to emphasize this, is the math. We have been helping educators buy homes with this loan for years and it breaks my heart that there are not more options available to past clients.
If you would like us to review your CalSTRS 80/17 and explore any options available to refinance into a lower interest rate, you can either leave a comment below, complete this short form, shoot me an email or give us a call.