Refinancing a mortgage

[LTS3]

Has anyone refinanced a home mortgage lately for the lower rate? How easy and painless is the process? I'm still paying a 5% interest rate

That was the lowest rate available when I took out a mortgage 6 years ago. I have thought about refinancing but then I hear or read something that makes me reluctant to. Someone told me that I need a lawyer to close the new loan (?) and that closing costs were in the thousands of dollars And there are those horror stories about people who refinananced and ended up with problems getting their payments applied to their account and such.

Are there any good easy to understand web sites that go step by step on how to refinance?

The bank where my current payments go to sent me a info thing about refinancing for a lower rate so that got me thinking again. The savings from a lower interest rate would be nice, espcially now that my paycheck is a bit smaller because I can't put in overtime if I work more than my 7.5 hours.

 

[ginny]

Actually I'm closing tomorrow, so I will let you know how painful the process is.  I expect to sign my name about a million times like you usually do.  My original rate was 5.75 and the new rate will be 3 something.  I think if you can get a lower rate then you should refinance.  I'm only adding one year to my term because I got a 30/fixed before.  

 

[Willowy]

There are fees involved. Closing costs and whatnot. I've read that it's only worth it if you can lower the interest rate by at least 1% and you have a while left on the old mortgage (or if you need the money, if you plan to refinance for the whole amount). But since the rates are pretty low now that shouldn't be too hard .

I'm paying 5% even though my credit is excellent, because it's an "unusual" property (2 houses on the same property) so it didn't conform to federal standards, and the credit union had to underwrite the loan themselves. So I can't refinance . But my parents did a few years ago. I think closing costs are around 2% or 3%. There are some no-fee options, but that just means they add it to the loan.

Call your bank and talk to them about what to expect. That's their job after all .

 

[denice]

I knew someone who refinanced a number of years ago when interest rates first dropped significantly.  It was a painless process for her.  She chose to get a shorter term mortgage when she refinanced.  Her payment stayed close to the same but she was able to cut 7 years off the mortgage itself.  

 

[Winchester]

 
I knew someone who refinanced a number of years ago when interest rates first dropped significantly.  It was a painless process for her.  She chose to get a shorter term mortgage when she refinanced.  Her payment stayed close to the same but she was able to cut 7 years off the mortgage itself.  

We always refinanced when the interest rates dropped. We would take a few years off the mortgage each time, but still end up paying about the same or just a little bit more. As a result, we were able to pay off the mortgage a lot quicker.

I remember that a realtor would have to come in to check the house out, so the bank had an idea of what the house was worth. I always hated that. I'm thinking from start to finish, it might (might) have taken about a month. And yeah, you sign and sign and sign and....

Good luck! 

 

[LTS3]

The info thing I got from the bank didn't have much info, other than comparing what the payment for a refinanced mortgage might be compared to my current payment at the current rate. The refinanced payments are a couple hundred dollars less just for principal and interest. I'm not sure how much the escrow portion would be. I'm pretty sure I can get whatever the lowest rate is at the moment, 3.75% or so. I have a high credit score and finances in general are in good shape. The mortgage is the only debt I have. Do I refinance for the original mortgage amount or just what the current balance is?

I'll contact the bank for for more info and look into some small local banks as well. What documents are typically needed to refinance?

 

[Winchester]

You only refinance the balance; don't refinance the original amount. Our house has been paid off for quite a while now, and I don't remember what all paperwork we needed. Sorry. 

Contact all the banks in your area. Don't forget about credit unions, too, if they do mortgages (I don't know if they do).

 

[Willowy]

Do I refinance for the original mortgage amount or just what the current balance is?

You can do it either way, or something in between. It depends if you need some money for a big project, or if your main goal is to have a much lower payment. If you only refi the balance, the payment will be much lower, unless you also go from a 30-year to a 15-year. Which is good too; get it paid off faster without a higher payment. If you refi the entire amount, the payment will still be lower (because of the lower interest rate) and you get some cash.

My parents didn't refi for the whole original amount, but they got something like $5000 over the balance because they wanted to have the roof done.

Doesn't your bank have someone who can explain everything? Maybe I'm just lucky, maybe most banks don't do this, but the director of my credit union will take the time to explain every tiny detail if you set up a meeting with her.

Haha, on a totally random note, I was just re-reading the John Grisham book The Firm (written in 1991) and part of the employment perks they give him when he goes to work at the firm is a "special rate" of 10% on his mortgage. I wonder what a non-special rate was at the time. . . . I realized how terrible that sounds now; not even someone with the worst credit would get that high of a rate. Of course, back then your bank account offered a decent interest rate too :/. Can't have it both ways I guess. So we should all feel fortunate to not have 1991 mortgages :lol3:.

 

[LTS3]

No there are no local branches of this bank in my state. I originally got the mortgage through a local bank chain but within a year the the mortgage was transferred to this big name national bank / financial institution. I can't remember why it was transferred.

If I go to any bank in the area there are people who will answer questions. I like to find info online first so when I go to the bank I know what to ask otherwise I just feel that I'm wasting the bank person's time even though it is their job to explain their services and help customers choose the right service or product.

 

[DreamerRose]

Haha, on a totally random note, I was just re-reading the John Grisham book The Firm (written in 1991) and part of the employment perks they give him when he goes to work at the firm is a "special rate" of 10% on his mortgage. I wonder what a non-special rate was at the time. . .

. 

It was about 12% in the 1980s. Needless to say, everybody refinanced when the rates went down. Mine started at 9 3/4%, and I refinanced for 7 1/4%. I have not refinanced that amount, because by the time the rates came down again, I owed less than $50,000, and nobody would do it. You also need to keep in mind that where you are in the amortization schedule because you pay up front for all the interest. My first payment applied like 36 cents to the principal; the rest was interest. I am now close to paying off my mortgage, and some bright young thing from the bank recently called up and suggested that I put the rest of the mortgage principal on my home equity loan at 4 1/2 % interest. Good idea for the bank, not so great for me. My monthly payment now goes almost all for the principal, so adding the remainder to my home equity account means I would have paid twice for the money - once during the mortgage and a second time on the home equity loan. 

 

[handsome kitty]

 
No there are no local branches of this bank in my state. I originally got the mortgage through a local bank chain but within a year the the mortgage was transferred to this big name national bank / financial institution. I can't remember why it was transferred.

If I go to any bank in the area there are people who will answer questions. I like to find info online first so when I go to the bank I know what to ask otherwise I just feel that I'm wasting the bank person's time even though it is their job to explain their services and help customers choose the right service or product.

Most banks have the same rates.  You can look them up on-line.  You don't have to go with the institution who sent you the rate.  I personally like to deal with a real person who I can go to with questions.

 

[ginny]

I can't remember what my rate was when I bought my first house in 1995.  I think it was in the neighborhood of 8% but I just don't recall.  So when I got my 3rd house in 2005, 5.75 seemed like a really good deal.  

You have to speak to a loan officer to get all the information you are looking for.  The application process is a pain.  Actually it was a pain for her,  all I did was sit there and wait but it took 3 hours.  

 

[MoochNNoodles]

We have refinanced with an out of state bank.  They sent a person to our house to do the paperwork.  He was not an employee of the bank and no one inspected our house.  I can't remember what his job title was...it's on the tip of my tongue but I just can't spit it out.  We communicated with the bank over the phone and by e-mail.  DH handled most of it; that's really his forte.

 

[ginny]

Well I'm back!  It's all done and my new rate is > 2.5 % less than before which saves me money!  And my first payment won't even be due until Oct 1.  It wasn't as painful as I thought it would be since it was done inside the bank, AND i didn't need a lawyer so I saved myself at least $500 in fees.   And this time I didn't have to sign as much as I did eleven years ago (at the original closing).  Closing was less costly too.  Whew.  I'm glad this is over and that I'm going to be saving money now!

So to answer your original question:  this process started in July when I visited the bank and got set up with an appointment to see the loan officer.  She went through this application process which took 3 hours.  She sent out an appraiser (which was nerve-wracking) and he spent at least an hour checking out my whole house top to bottom.  And today I closed.  I had to pay $300 for the appraiser and today I had to bring $500 to closing for additional fees.  It would have been more if a lawyer was there.  Refi is less of a headache than the original loan but there's still a lot to it.  

 

[LTS3]

That's great @Ginny

I checked BankRate.com for refinance info using my info. Rate are pretty much the same everywhere, only difference is whether there are points and / or fees. One lender is offering a 2.875% rate with no points or fees. I have never heard of this lender before. I did the general calculator thing too and it looks like I can save maybe a few hundred dollars monthly if I refinance. Not much but it helps. Closing costs are estimated to be around $3000. I don't know if this matters but I have a condo, not a house. I'm only interested in a fixed rate with no points and no PMI.

I have tomorrow off from work and I do have to head into the square to the post office and library. I'll stop by the small local bank and see what they offer.

 

[LTS3]

Dropped by the local bank today. They are offering a 2.875% rate with no points for a 15 year fixed. The person I talked to was nice and explained the typical process and fees. She loved that I was a local resident supporting the local bank

I can apply online and the application would reviewed right away. Payments with the 15 year fixed is only about $100 less than what I'm currently paying but my current payments also include extra money to be applied to the principal and escrow.

Other banks in the area (some national chains, a few small local ones) have a slightly lower rate with points or a slightly higher rate with no points and higher closing cost fees. One small bank has a $100 condo questionnaire fee included in their closing cost

 

[AbbysMom]

I had the best luck with the local credit union that I'm a a member of. Because I was a member, they waved a lot of the fees.

 

[LTS3]

I missed the call from the bank last Monday

I called and left two messages but have not heard back yet. I'm guessing the person took a few days off early for the holiday

I should hear back tomorrow otherwise I'll call again. I've already gotten a letter from the bank's attorney with info on what documents I will need to provide at closing.