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refi mortgage

13 years ago

had 30yr mortgage. was 5 yrs into it. asked bank about refi options and they said i could refi for free and drop interest 1 full percent. or i could pay about 3% fee to drop interest 2 full points. if i was smart, i would apply saved money from lower payment to principal and pay off loan early. i certainly will not be in house in 30yrs. heck, won't even make it 5yrs.

Comments (7)

Billl
13 years ago
Is there a question in there somewhere?
joe_mn
Original Author
13 years ago
was expecting to be scolded for not dropping rate 2 points. that route would have paid for itself in 3yrs based on my loan balance. the refi i did was minimal paper. went down to bank and had a few docs notarized. took about 15 min. i stayed with original bank so perhaps thats why the paperwork was so easy. a full on refi would have required going to a traditional closing session.
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I am going to be working under a similar arrangement. It is my understanding that it will be a refinance because you are basically refinancing a lien that is on your property. In my case, it is a construction loan through a bank but in the builder's name since the rate is so much lower and the bank will take a lien against the property. I will be interested in how this works out for you. A few lenders that I have talked to seemed to be confused by this but my reading of the Fannie Mae rules shows it to be a refi. It may also depend on how long you've own your lot.
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I just applied for a refi and they wanted both my last two paystubs and my W-2s for the past two years, as well as contact info for both my current employer and past employers up to two years (I changed jobs 1.5 years ago). How much weight they will give your current salary vs. what you've been making, I don't know, but they will look at two years.
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If you wanted to refi the entire amount, (325+42), that puts you at about 81% LTV. But, that's based on the assessment, not one an appraiser would give you. And, that doesn't include closing costs. So, while that's probably a good estimate, I'd find out what homes in your neighborhood are selling for. Foreclosures have killed so many refi's no matter what credit rating people have. It's sad but true. And, if you do have to end up with a full refi, you don't want to get stuck needing a few thousand dollars. I do think your best bet is to get the modification done first and hope you don't have to do the full refi. Once that's resolved, then you can get rid of those credit cards :) Good luck!
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"Does anybody know why banks don't do this, other than income from the extra fees? " Some lenders actually do what you are suggesting. They never used to, but many people have been getting unsolicited offers for zero cost refinancing with their current lenders. And of course, that is about the money too. Since lots of people refinance before paying off the loan, some lenders have found it makes more sense to lower the rate than to lose the business completely. Of course, most lenders sell off the loans they make, so they don't care if you pay off early etc. They make all their money off of the up-front fees, not the 30 years of interest.
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sherwoodva
12 years ago
Joe, the bank must have charged you something. I can't imagine they would let you get a lower interest rate with no fees.

You are correct, paying off early is the real way to save on the interest.
weedyacres
12 years ago
Some banks are doing streamline refi's now. The interest rate is a little higher than market rate, and that higher rate pays the points and fees so it comes out as a no-cash refi.
joe_mn
Original Author
12 years ago
i did it on 05/2010. no fee 30yr rate was 5.3%. i was above that. i checked in august and it was 4.5% for no fee. grr. bank says it is program to keep current customers from fleeing. can do it once a year. so i am eligible now again but rates are higher.
Billl
12 years ago
Someone at most of the major banks realized that it was cheaper to offer good customers lower rates than to have them take their business elsewhere. Not exactly rocket science, but pretty revolutionary given the level of incompetence we've grown to expect from our giant, moster, mega-banks.

As for the strategy, if you are only going to be in the house a couple of year - take the money and run. No use paying points for an even lower rate. While you are at it, I wouldn't pay extra on the house if you are disciplined enough to save other ways. Just take the money you are saving and put it in a special "I'm Moving Soon" account. It is usually better to have cash on hand when you sell as opposed to an equal amount of equity. Paying off the house early is obviously a great goal, but only if you plan on living there long term.
joe_mn
Original Author
12 years ago
bank mailed paperwork to me. had 3 or 4 pages that needed to be notarized so we went to bank. notary signed date and made mistake so she crossed it out. a week later we got call saying packet was rejected for notaries correction. had to resubmit paperwork.

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