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Message
How much will/should it cost (up front) to refinance my loan? (Mortgage)
Posted on 5/9/16 at 9:07 am
Posted on 5/9/16 at 9:07 am
I owe $403,000 with 28 years left on a 30 year loan. It's not that my rate is bad (4.5%), but I definitely got it at a particularly high point. I want to pay it off early is why I want to refinance, so I would be refinancing to a 20 year mortgage. Apparently I can get a rate at 3.125% for 20 years, and this would cost me about $148 more per month, which is easily doable. The rate is from Sebonic, an online lender, who say they will give me $1900 in credits on the closing.
When we bought our house, my wife agreed we could try to put extra money towards paying off the mortgage early, but after we took care of some house projects. My wife and I knew the house needed work (she isn't some nut spending beyond our means or anything, but she definitely puts remodeling ahead of paying off mortgage). But we are never going to start to pay off the mortgage at this rate, at least not in a way that will knock more than a year or two off. But if the closing costs are not insane, my wife agrees with paying the mortgage off early by refinancing.
Now that these rates are historically low, I ran the numbers and found that a 20 year mortgage would increase our payment by $1700 -- for our purposes nearly a wash. A 15 year would raise it too much. But the big question is how much should it cost to refinance a $403,000 loan because I know there are about 500 fees associated with refinancing? And I know these banks/lenders are going to sneak these fees in and give me a nice surprise at the end, different than what they tell me up front.
When we bought our house, my wife agreed we could try to put extra money towards paying off the mortgage early, but after we took care of some house projects. My wife and I knew the house needed work (she isn't some nut spending beyond our means or anything, but she definitely puts remodeling ahead of paying off mortgage). But we are never going to start to pay off the mortgage at this rate, at least not in a way that will knock more than a year or two off. But if the closing costs are not insane, my wife agrees with paying the mortgage off early by refinancing.
Now that these rates are historically low, I ran the numbers and found that a 20 year mortgage would increase our payment by $1700 -- for our purposes nearly a wash. A 15 year would raise it too much. But the big question is how much should it cost to refinance a $403,000 loan because I know there are about 500 fees associated with refinancing? And I know these banks/lenders are going to sneak these fees in and give me a nice surprise at the end, different than what they tell me up front.
This post was edited on 5/9/16 at 10:16 am
4
Posted on 5/9/16 at 9:17 am to AndyJ
I didn't pay a dime to refinance my house. I was able to get a lower rate and eliminate PMI with less than 20% equity.
Posted on 5/9/16 at 9:24 am to seawolf06
Then you just paid it in a different way seawolf. Quote out the lender fees along with the title fees with the rate. With owing that much, I would definitely look for a flat origination fee or low origination. I would guess if you shop around you could get the rate you are looking at with about 1500 in lender fees along with appraisal cost. Title fees should be around $600 plus lenders title insurance.
Posted on 5/9/16 at 9:25 am to seawolf06
quote:
seawolf06
quote:
I didn't pay a dime to refinance my house. I was able to get a lower rate and eliminate PMI with less than 20% equity.
Believe me, it cost you. You didn't pay out of pocket, but you paid on your interest rate-and just because it's lower doesn't mean you got the lowest you qualified for (and lenders are paid based in part on the rate they convince you to accept)-or you chewed up equity in order to fold the closing costs into your loan's principal balance.
Mortgage companies are not Non Profits and Brokers and Loan Officers don't work pro bono. Neither do appraisers, Underwriters, Title Abstractors, Real Estate Attornies, notaries, etc. almost all of whom are necessary to generate, submit, underwrite, approve, prepare and close your loan for you.
You may have gotten a deal you liked. May have saved yourself some coin. But you paid for it. I assure you.
This post was edited on 5/9/16 at 9:27 am
Posted on 5/9/16 at 9:39 am to GFunk
quote:
Mortgage companies are not Non Profits and Brokers and Loan Officers don't work pro bono. Neither do appraisers, Underwriters, Title Abstractors, Real Estate Attornies, notaries, etc. almost all of whom are necessary to generate, submit, underwrite, approve, prepare and close your loan for you.
You may have gotten a deal you liked. May have saved yourself some coin. But you paid for it. I assure you.
I refinanced approximately 3 years ago. Paid $995.00 for closing, which I thought was very fair. Obtained their best advertised rate of 2.875 % for 15 years.
With fees as low as $995.00, do you think there was still some additional room to get an even better (albeit, very slim) rate?
Posted on 5/9/16 at 9:45 am to Will Cover
Probably not. On the house I just purchased, my mortgage guy was upfront about everything. He knew what rate he could sell the mortgage, what he wanted to make, and was gonna give me the rest in either reducing fees or closing credits.
3.3%, pay $2,500 in origination fees
3.4%, pay zero in fees
3.5%, zero fees plus $2,500 in closing cost credit
3.75%, zero fees plus something like $7,500 in closing cost credits.
3.3%, pay $2,500 in origination fees
3.4%, pay zero in fees
3.5%, zero fees plus $2,500 in closing cost credit
3.75%, zero fees plus something like $7,500 in closing cost credits.
Posted on 5/9/16 at 10:08 am to AndyJ
Thanks for the input everyone. For my original loan from a real bank I had a "closing/escrow fee", owners title insurance, lenders title insurance, mortgage recording charge, endorsements, appraisal fee, pricessibg, underwriting fees, and a bunch of fees less than $100.
But last time I was getting 2 mortgages, and I'm not sure how that affected things.
But last time I was getting 2 mortgages, and I'm not sure how that affected things.
Posted on 5/9/16 at 3:29 pm to AndyJ
You'll still be looking at having all those same fees again this time. It just depends on how you pay for them. In your loan amount, cash to close, or in your interest rate.
Posted on 5/9/16 at 8:43 pm to Will Cover
quote:
Will Cover
quote:
Obtained their best advertised rate of 2.875 % for 15 years.
"Best advertised rate," does not mean, "Lowest the customer can qualify for," nor does it mean, "We aren't making any money on this deal the rate and fees are so low!"
You've bought enough cars to know a pitch when you hear it, and mortgage companies aren't doing loans for free.
Posted on 5/10/16 at 7:54 am to GFunk
not to hijack but if I am at a 4.25 with 10 years left on a 15 yr mtg, would it be prudent to refi to a 10 year with a lower rate? or just keep as is and pay more a month.
Posted on 5/10/16 at 8:51 am to AndyJ
Call around. We refinanced to a lower rate and got a check for $500 from the bank. We actually qualified for more but that is the limit or something.
Posted on 5/10/16 at 8:54 am to mpar98
You would probably save a little money but most likely not enough to make it worth while since you are more cash flexible right now. Go to bankrate.com refinance calculator and play with the numbers. Figure out how much interest you would pay in your current loan vs if you put down the extra money per month. Each situation is different.
Posted on 5/10/16 at 8:56 am to AndyJ
If you can get 3.125% you shouldn't be looking to pay it off early. Itemizing deductions will bring your after tax rate down to just over 2%, which is right around the long-term inflation rate. In real terms, the cost of capital is zero or very close to it.
Posted on 5/10/16 at 9:35 am to mpar98
quote:
mpar98
quote:
not to hijack but if I am at a 4.25 with 10 years left on a 15 yr mtg, would it be prudent to refi to a 10 year with a lower rate? or just keep as is and pay more a month.
If you can find a good loan officer or mortgage broker and call them up or stop by their office and be up front about being unsure which makes more financial sense, they'll probably be able to work up both scenarios for you from a math standpoint so you can see which makes more sense for you personally.
Posted on 5/10/16 at 9:42 am to mpar98
quote:.
not to hijack but if I am at a 4.25 with 10 years left on a 15 yr mtg, would it be prudent to refi to a 10 year with a lower rate? or just keep as is and pay more a month.
I could get you 2.875% on a 10 year today. Typically dropping anything at 1% or more on your rate is beneficial, particularity if you are planning to own the property for more than 2 years. I don't know all the specifics like your loan amount and value of the property, but I'm going to go ahead and say yes you could probably save some money.
This post was edited on 5/10/16 at 9:43 am
Posted on 5/15/16 at 1:38 pm to GFunk
I understand that I paid for it in opportunity cost, but that wasn't the point that I was making. It depends on your situation and there are a lot of different products out there.
Posted on 5/16/16 at 1:27 pm to seawolf06
im in the middle of refinancing right now. the same company that holds my mortgage offered a lower rate and they will pay all fees. i just got the disclosure docs and went through them. the only thing i am on the hook for is the prepaid items (remainder of month interest) the term is staying the same and although im not getting a drastically lower rate (4.25 to 3.99) i am ditching PMI. actual APR will be 3.99 as opposed to 5. something for my current loan bc of the fees and pmi. is there anything i am missing that i need to take advantage of or not realizing?
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