refinancing mortgage

scrynJanuary 9, 2007

Can someone tell the costs of refinancing a mortage?

I am assuming this is what goes on:

-decide to refinance

-bank inspector walks through house and determine value for bank

-meet with bank and lawyer and sign over mortgage to new bank?

-pay lawyer (about 400)

-pay other random closing costs (2% of loan value maybe?)

Are there other things that are missing? I am deciding whether to keep my mortgage and pay off a hefty chunk so I don't have to pay PMI anymore (we have FHA and have to pay off 32% of value) and deal with the bank which is the worst bank ever Vs. refinancing and getting rid of PMI, by getting non FHA loan (we have payed over 20% of the house value) and having a bank we prefer to deal with. However money would be lost for lawyer and closing costs.

Also we have done alot of improvements to our house and this may mean increase in value and taxes (as the bank requires an inspection)

The current bank we go through is SO frusterating. I just called and was told that we would always have to have mortgage insurance, which I KNEW was wrong. Then I called back and got totally different answers. This is after I had to go through an hour long prompt about picking what number on the phone for this and that. ugh!

We have all our other loans and accounts through the "nicer" bank and it would also be nice to consolidate and have automatic payments.

The interest rate would not be too much different between the current mortgage and new rate because we have an ARM.

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Someone at the new bank should be able to give you a ballpark figure for closing costs. We refinanced our old home (twice) without a lawyer. Interest rates had dropped so much that it made sense.

The mortgage company we chose had someone from the title company come to our house to sign the papers - it was very convenient.

Our process:
1) started researching interest rates, closing costs, points, and comparing mortgage companies

2) Narrowed our selection down to 2 companies (one had our original mortage) and called them. Costs were about the same, but the company holding our original mortgage needed less paperwork because they already had so much information.

3) They sent us the application, we filled it out and waited. They did the appraisal. Took about 6 weeks. They called us and set up an appointment with a woman from the title company to come to our house to sign the final papers.
I think the closing costs ran about 2% of the loan (this is from memory and it was about 8 years ago).

Our bottom line - we went from a 30 year fixed mortgage to a 15 year fixed without a significant change in payments.

    Bookmark   January 9, 2007 at 11:05AM
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Mmm, so it is a much shorter and easier process than getting the first mortgage?

Did you not need a lawyer because the title and leans were already researched when your first obtained the mortgage? That is basically their job right?

    Bookmark   January 9, 2007 at 11:21AM
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We refinanced our mortgage a number of years ago with a credit-union fixed-rate home equity loan. There were no laywers, no fees, and no closing costs.

    Bookmark   January 9, 2007 at 1:57PM
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Hi Scryn,

Here's a rough breakdown of the basic, naked service fees for 1st lien financing;

Lenders CAN cover many (sometimes all) fees by hiking the interest rate so that the monthly yield will recover their costs within 3-5 years of those payments. Alternatively, if you expect to use the loan longer than that 3-5 year period, you are wiser to take a lower interest rate and pay the costs yourself.

MOST importantly, make sure you properly analyse and structure your personal home financing to match the effects of your personal safe retirement investments, as they are the opposite sides of your long-term family balance sheet. Mismatching your financing can actually cost you far more by "backsliding" on your family net worth than you can possibly gain by "no cost" refinancing, no matter how many times you do so.

Hope that's helpful.
Dave Donhoff
Strategic Equity & Mortgage Planner

Here is a link that might be useful: Estimates of Mortgage Closing Costs

    Bookmark   January 9, 2007 at 5:24PM
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Yes, we found it much simpler than financing the original mortgage. The title company handles (and charges for) the title search and the lien issue. I've bought and sold 5 homes and used a lawyer only once. The offer was so good that I took it to a lawyer who said "What's the matter? It's a good offer!"

dave (above poster) offered some excellent advice as well.

    Bookmark   January 9, 2007 at 5:54PM
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I'm curious on the deals where a lawyer is not used. Who is hired to look out for your interest? I had a purchase a few years back in a State where I didn't know the laws. I was used to the purchaser paying the State Transfer Tax. The closing documents came through this, as purchaser, paying the transfer tax. We were ready to close the next day. The bank and title company had reviewed the papers and everything was all set. I asked that the paperwork be sent to my attorney for review. He called me and said it was wrong....the property transfer taxes in that State were supposed to be split between the buyer and seller. So, $1,150 was deducted from my expenses and added to the Seller's expenses. Now, I'm not sure if this would have been caught by anyone before or after the closing, but I just don't feel comfortable doing $200,000, $300,000 and $400,000 deals without an expert representing me. Just my feelings.

    Bookmark   June 29, 2007 at 8:31AM
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Perhaps it varies from one state to another. I've bought and sold a home in California (pre-boom), Texas, WA state (4 times). None of those states had a "State Transfer Tax".

I read everything I signed (as did DH). And when I didn't understand something, I had them explain it to me, in English.

    Bookmark   June 29, 2007 at 8:12PM
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