refinancing fees....

[sunnysandiegan]

We can refinance with our current lender, whom we like, for 4.5% (today's interest rate), 15 year fixed rate. (I called today and we would qualify and not have any points due to our loan-to-value ratio.)

We currently have 20 years (plus a few months) left on our loan at 6% interest (30 yr fixed). We pay extra towards principal every month, which has knocked 3 years off this loan so far. (It was a re-fi.)

The monthly payment would be about the same as we pay now (since we pay over the amount due) and we would knock an additional 5 years off the loan. I played with several mortgage calculators tonight and we'd save up to $60,000+ by refinancing. The most realistic scenario (sticking with our current payment plan, which is higher than our exact mortgage) still saves us $33-36K, depending on if we finance the fees or pay them in cash. (We have the cash.) It does not allow for differences in property taxes, though.

HOWEVER, two things:
1) The total closing costs will be $4427.97, which seems really high to everyone I have spoken with. It is ALL fees associated with the re-fi and our lender is known for no hidden fees.

2) Included in the fees is an appraisal, which is required in CA and FL now with our lender. With an appraisal, our property will be assessed higher than it currently is. (We purchased before the bubble.) We checked our current county property tax statement against what the homes like ours have sold for recently and calculated the tax rate (1.10195%) by the actual selling prices of our model. The difference will be $67-85 per month. Our place was a dump when we purchased and we've made lots of improvements. However, they were made for our benefit not necessarily for resale value, so we're not sure how they will effect the home value.

So, I went online to check out other rates and companies for re-financing to see if we could re-fi without the $4430 in fees. The rates are all over the 3-6% interest rate map with a wide range of points and fees. I was only looking at 15 year fixed loans because that is the exact product we want. We haven't re-fi'd during the low thus far because we hadn't gotten to the point where we could re-fi for 15 years without increasing our monthly payment beyond our comfort zone. (Banks will loan us far more that our comfort zone. We have excellent credit.) Without calling all of them, how would I know if we'd get the points waived due to LTV (like with our lender) and/or what the TOTAL re-financing fees would be?

Do the above fees ($4430) seem excessive considering we are in CA (high COL city)? And for the SAME LENDER as we currently have (national credit union)?

Is there a way to know how truthful other lenders are in quoting their TOTAL re-fi fees upfront? I have heard soooo many stories about this issue. We've re-fi'd with our lender before and the total fees quoted upfront were actually a tad bit higher than we we ended up paying (we paid less). I don't want to give up our lender, whom we like, for lower fees and end up paying more fees down the line. The difference was $1-4K. One lender showed $585 as total closing costs! That seems too good to be true.

DH says, "Better to do business with the devil you know than the one you don't." He also hates change, though.

My dad is appalled at the fees our current lender wants to charge us for a re-fi. He is comparing it to the new loan fees he paid on a mortgage last Aug/Sep in a much lower COL for a slightly lower loan amount. Is the difference the lender or the re-fi climate or something else? (He insists it is a straight percentage of the loan value, but that doesn't work out with the numbers.)

Thanks for any insight....

[russsk]

I would suggest calling around and getting a couple good faith estimates to compare to your current lender. That way you can compare apples to apples, etc. You may also be able to use one to negotiate a better deal with your lender. That said, 4 k doesn't sound unreasonable to me, though you didn't say how much you are refinancing.

Re: points - I am not familiar with points being waived to to LTV, but I know that you can certainly get a loan with no points, if that's what you want. We owe a lot on our house, but we do not have any points. Our rate is 4.5%.

Re: taxes - It may be different in CA, but here your bank appraisal for refi has nothing to do with your property taxes. Here, at least, the city has their own appraisers who re-value properties every three years. They did tell us, however, that they fudge numbers based on purchase price - we bought at the height of the bubble and pay more in taxes than comparable properties purchased more recently. But it's my understanding that they do not have access to appraisals made by banks - that is info strictly for the bank.

And I think $600 is too good to be true. There will be other fees.

[sunnysandiegan]

Thanks! I'll get back to this tomorrow. I need to find out about the property appraisal. We were told that it would adjust our property taxes, but we didn't need one the last time we re-fi'd. So, I don't know for sure. I'll ask around today and tomorrow. That alone reduces the total savings pretty drastically, but there is still a savings.

[leavemealone]

I asked DH (works in mortgages) and he said it seemed kind of high. It's hard to know without more info but from the info provided, it seemed a bit high.

[cornflake girl]

Originally Posted by sunnysandiegan

Thanks! I'll get back to this tomorrow. I need to find out about the property appraisal. We were told that it would adjust our property taxes, but we didn't need one the last time we re-fi'd. So, I don't know for sure. I'll ask around today and tomorrow. That alone reduces the total savings pretty drastically, but there is still a savings.

In CA property taxes are *not* affected by appraisals. Your house could appraise for 100 million $$ more than what you paid and there would be no change in your prop. tax. You can thank proposition 13 for that.

[sunnysandiegan]

Originally Posted by cornflake girl

In CA property taxes are *not* affected by appraisals. Your house could appraise for 100 million $$ more than what you paid and there would be no change in your prop. tax. You can thank proposition 13 for that.

Thank you for the information.

[sunflower.mama]

You could always look for a no closing costs loan. All that does is bump up your interest rate a bit because the lender pays all the closing costs. We did this in Dec for a 4.875 interest rate on a 30 year fixed. You do need to pay enough to fund your escrows at the closing, but the old bank refunds your old escrows 30-60 days later, so you don't pay a dollar out of pocket. Going that route would make it easier to pull the trigger since you'd only be saving $ by refinancing, not spending to save, KWIM? It also makes it easy to refi later down the line if rates get lower (not likely) since you haven't invested anything in your current rate.

I will add that we refied in a traditional manner, with closing costs, a few years ago. We probably paid in the ballpark of $4k.

I can't see how an appraisal done for a mortgage would affect your property taxes since the appraisal is a private report, prepared for the lender's eyes only. That's different from an assessment, which is a public record.

[Ygle]

We did almost the exact same thing in 2004 and our no fee refi ended up around $4000 as well... I can't remember the exact numbers, it was something like $400 for the appraisal (and they let me pick an appraiser which was cool, so I also got the full report and just had to send a copy of the amount to the new lender), $2800 for property taxes (when you get a new loan they want the full year paid for), $400 for home owner's insurance (same deal as with the prop taxes), $265 to the title company, $65 wire transfer fee (from the original bank loan)... and a few other miscellaneous costs. I don't know how you can get a loan for $600? Maybe they are saying they will charge a fee of $600 on top of the closing costs? The money didn't really end up costing us anything though, because the prop taxes and insurance would need to be paid anyway, we were going to get an appraisal in any case (to get rid of mortgage insurance) and then we got two months of not having to make any payments (should be a minimum of one month before your first payment is due and possibly longer depending when the loan goes through).

Oh, just the title insurance was over $600 (paid to the title company, not something the lender has control over) and there is a lien search charge, and processing fees for both the lender and the mortgage company and the interest charge on the loan for how ever many days until the end of the month...

[Ygle]

I started wondering more about this and I found this site, seems to do a good job of describing all the settlement costs involved... and most of these costs are going to be the same no matter what lender you use. http://www.federalreserve.gov/pubs/s...nt/default.htm

[sunnysandiegan]

Thanks Ygle! I glanced at the site you linked and want to read it more thoroughly when the LO is in bed. I recall most of those fees (from our original mortgage and the first re-fi) and the more I read, the more I think these fees from our preferred lender are just a tad higher than other places. It'd be worth it to us to keep our current lender. I'm a little preoccupied with our upcoming vacation, so I don't know when I will start the re-fi process.

[sunnysandiegan]

Following up to say we started the re-fi process with our current lender last week (Thursday) through the main call center. Already assigned to and met our local loan officer and have the packets of papers to sign (initial forms, etc). We'll be knocking five years off our mortgage and paying a little less than our current monthly amount (if we roll the costs into the loan). We plan to pay all or most of the costs outright and pay a little extra on the loan each month (a smidgen higher than our current amount), so it'll be even shorter (7.5 years faster than current mortgage) and greater interest savings (lower total amount paid to lender).

ETA: I learned our credit scores (free) and had to laugh. DH used to be in the 600s when we met. He had a good job and salary, but was a bit clueless in the finance department. I've always been in the 700s (even with crappy jobs/salaries at times). DH's scores are now higher than mine!!! Not by much, though. We both average over 800. I find it interesting that one credit bureau rates us the same (798); one rates him higher than me (both over 800); and one rates me higher than him (both over 800). We got a better rate than originally quoted (4.25%), due to our credit ratings, too.

[sunnysandiegan]

We closed early last week and our total fees for the re-fi ended up being $2922. They overestimated everything and then returned money to us. It was totally worth it and we are glad we did it!

Our original mortgage was 8.125% for a 30 year fixed rate loan with a maturity date in mid-2030. We purchased just below our means and made it through a six-month dual unemployment stint without going into debt and then refinanced after both of us had been employed for over a year. The re-fi was 6% for a 30 year fixed rate loan with a maturity date in late 2033. Our amortization schedule showed the loan being paid off in early 2030 due to our extra payments towards principal every month for the last five or so years.

Our new loan is 4.25% for a 15 year fixed rate loan with a maturity date in mid-2025. The new monthly payment is slightly less than what we were paying, so we'll still be able to pay a little extra towards principal each month to whittle it down faster than 15 years.

[texmati]

awesome update! We had been thinking about a refi, and had many of the same quesitons as you. If we do end up doing it, I hope it works out as well as it did for ya'll.