Me underwater? No way BoA!

Yesterday I called Bank of America to see whether it was worth my while to look at refinancing my current mortgage. I had refinanced a couple of years ago to a 5% mortgage and it seems like rates being advertised around have been around 4% for quite some time, but with closing costs and fees I wasn't sure it would be worth refinancing.

I was transferred to a guy and he said he would check it out. He put me on hold and said that my loan was more than my house was worth by about $6000 and 5% is a good rate and rates were actually more like 4.5% now. He also told me that if I refinanced my house and wanted to avoid a PMI payment, I would have to come up with $37,000 additional.... like another down payment to make my loan to value less than 80%! Un-freaking-believable!!

When I purchased my townhouse in 2002 I put down 15% and eliminated the PMI even before refinancing in mid 2009. I'm no idiot so I do know that home prices have gone down some, but there is no way this house is worth nearly $30,000 less than I paid for it nearly 10 years ago. My neighbors bought their unit a year or so ago for more than I paid, so I assumed we had a lost decade of real estate value and I'd just have to wait for the market to rebound in a couple of years. So much for rebounding.

Then I remembered that I had read or heard something about Bank of America and other big banks using their own appraisers who low-ball the appraisals and people weren't getting home loans. I think this is what is going on. Apparently, they purchased an appraisal company which they use exclusively and the BoA guy I talked to on the phone gave me a number almost instantly. After I was off the phone I checked Zillow and the value they had posted for my house was much more realistic (about $36,000 more than the estimate BoA had given me). That was a relief. I know I have very little, if any equity in my home at this point and will probably have to wait before selling or else I'll end up paying or short selling, which I certainly don't want to do.

I do like owning my own place and it would cost just as much to rent a 3 bedroom in my town or the northside of Chicago. As much as I don't want to spend another winter in Chicago, it looks like I'm going to have to. bbbrrrrrrrrrr