Refinancing: when to cut your losses and switch banks?
I'm curious to know if anyone has any thoughts on this....so we're currently in the process of refinancing our home, which is just squeaking by at 80% LTV with the most recent appraisal. We made the decision to go with our local bank to bring the loan back to our community. Unfortunately, this has turned into a nightmare as they received ten times the number of applications they typically receive and the local loan officer is in way over his head.
So now we have the following dilemma: we started this process in January and locked at a good rate. The appraisal was within days, the title search was done, and everything was back at the bank well within our 30-day lock period. Then it sat. And sat. And sat. Then they lost some of it. Then it sat some more. They kept assuring us things were moving forward and promising to return calls, but rarely did.
Now it's March, and our lock period has long since expired. The bank has raised its rates significantly and is now a sold half percentage point above the going rate with our current lender and the other credit union that we bank with. The fine print says that once the lock expires, we revert to the higher of the lock and market rates (lousy policy to begin with, but there ya go). The bank has also stopped offering everything but 90-day locks and has a big warning that they're weeks behind on apps on their website, but of course none of that was the case back in January.
So...we're wondering whether/how long to stick this out. If we cut our losses and move our refinancing request to another bank that can offer us a comparable or lower rate and (hopefully!) a more competent/timely closing, what sunk closing costs should we reasonably expect to pay at the first bank? The appraisal and title search were third-party efforts, for instance, so it seems reasonable to pay those if we back out---we don't want independent parties who did their jobs to suffer as a result. But what else can the bank require us (or should we offer) to pay if we back out at this point? Is this likely to be good or bad strategy in the long run, assuming hypothetically that we lock at an identical rate elsewhere?
This is all a little nuts for us since when we first bought our home we had a fourteen-day close that was smooth sailing all the way (although, granted, it was in the midst of the mortgage collapse so they weren't exactly closing a lot of loans then....but still never expected months of this!)
Any advice would be welcome---thanks!