Q & A with Dottie Herman: On Refinancing and Renting in Manhattan

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Q: My husband and I were trying to do a cash-out refinance, however, that was basically impossible due to our LTV ratio. So now we have to do a refinance and take a home equity loan. We have two options. One brings our mortgage to a conforming loan, with a larger home equity loan but with a low rate. The other keeps our loan a jumbo and we take a smaller home equity loan. The monthly payment, including the new mortgage payment and the equity loan, is less each month with the larger home equity loan and the conforming refinance. We can't figure out which one is better and makes more sense in the long run. Both home equity loans are 10-year, interest free. Any guidance would be appreciated.

A: Home equity lines of credit are tied to the prime rate, meaning they can adjust over time. The prime rate has been 3.25 percent for a number of years now and it is expected to remain low through the end of this year at least, but likely into 2014. That said, it will most likely go up over time which will push the interest rate on your home equity higher. Currently, the payment with the larger home equity would certainly be lower for now but over time can be much higher. Once the Fed starts raising the prime rate, it will likely be sustained over a period of time. You also aren't paying any principal on the second, which pushes the payment higher with the jumbo loan, but principal also lowers over time.

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Q: I'm planning to move to Manhattan in August. How long ahead of time should I start looking for rental apartments? I don't want to start too early and fall in love with something and have it be rented out by the time I need to move.

A: The real estate market has really heated up in Manhattan, and it's recommended that you start your apartment search at least 6-8 weeks prior to your anticipated move-in date. Many of your rental options may be in condominiums that are being offered for lease, in which case there will be an application process that can take up to two weeks. We also recommend that you establish a banking relationship in New York and bring your written recommendations from previous landlords so that if you do "fall in love" with an apartment, you can react quickly to secure it. Wishing you the best in your search. Please let us know if we can put you in touch with an Elliman Rental Specialist to assist you with your search.

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Q: I am trying to sell my home and we finally have a buyer who made an offer. They are saying they can't go any higher on their purchase price, otherwise they won't be approved for a loan. How do I know if this is actually true or if they are just trying to get my house at an amazing price?

A: The rubber has to meet the road at some point.  If the buyers are being evasive, they may be negotiating or they may actually be maxed out. It's going to be very difficult to find this out unless you advise them that you won't take their offer and see what happens, since no one involved would likely give you inside information letting you know they can go higher. If they are negotiating and really want your house, they'll make it work. The big problem is, of course, that you may lose a buyer.

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Q: I am thinking of doing a refinance. Can I build my closing costs into the refi? Also, what is an assignment fee that I see listed on the costs?

A: Generally, closing costs are built into the mortgage unless you have an issue with loan to value, which may cause extra costs or render the loan not approvable. More times than not, the costs are built in. As for the assignment, that's one of two things. Some banks routinely assign their loans at the closing table.  If that's the case, the cost should be on the bank, not you.  However, you may be assigning the current loan in order to save money on the closing costs.  If that's the case, the assignment must be recorded and that is a charge you are responsible for.

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Dottie Herman is CEO of Prudential Douglas Elliman. If you have a real estate question for Dottie, please send it to; Reporters@WPCnews.com