Any tips on refinancing home loan? (1 Viewer)

[Luc]

OK, I currently have a 30yr fix home loan for 300,000 at 8.35%. This will be the second year of payment. I called around and got one lady who can give me somewhere in the ballpark of 7.3% 30yr fixed. She said no closing cost and no points (that's always tricky to deal with). I'll be meeting with her this Friday to discuss the details. Any tips on what to expect and what to look out for. Thanks in advance...

 

[Patrick Sun]

Don't let them roll anything like fees or misc costs into the remaining balance of the loan.

 

[Jeff Ulmer]

I'm curious what you mean by 30 yr. Is this your amortisation period or the mortgage term? With the market the way it is today, I'd be looking at no more than a 2-5 year term (amortisation whatever you want), and go for the lowest interest rate possible, even if it's variable. This will lower your net amount by thousands, if not tens of thousands of dollars. Even if rates go up (which they won't in the short term), the increase would have to be significant to warrant a fixed rate where yours is now.
------------------
Link Removed | Burt Lancaster is Link Removed | dOc

 

[Scott Merryfield]

A rate of 7.3% seems slightly high. A co-worker just refinanced at 7 1/8 a week or so ago (no points), and the feds just dropped interest rates again today. This may drop mortgages a little more (but it's no guarantee).
Make sure you check over all the paperwork very carefully. We have refinanced several times, and a couple of times the finance company screwed up items. Once they even had the length of the loan wrong -- 25 years instead of 30. The processor had the nerve to say "well, it's only another $50 per month". I told her that if she thought that was insignificant, she could pay the extra $50 per month and threatened to not show up at the closing that day if they did not fix the problem -- she originally claimed she could not correct the problem without starting everything from scratch. After I refused to show up for the closing, they somehow figured out how to correct the problem in time. Needless to say, I will never use that company again.
You may want to try a mortgage broker instead of a single finance company. They can shop around for the best rate. I have had good luck with a couple of brokers.
------------------
My DVD Collection
AFI 100 Films to watch: 40 -> 5

 

[Bill Lucas]

I can't agree with Jeff. Why get a teaser rate for a short term when interest rates are so low? Wait a bit and see what today's lowering of the Fed Rate does. It should help a bit. 7.3 with no points and no closing costs is a good deal. Yes, you can get a lower rate but you'll have points and fees which will add to the loan balance. If Jeff is advocating a 2 or 5 year mortgage that fully amortizes in that time period I don't think he knows how astronomically high the payments could be to fully repay the loan in that short a time period. I spent 15 years as a mortgage loan officer. I know how it works.

 

[Jeff Ulmer]

I'm not suggesting a 3 year amortization as yes, that would make the payments pretty high.
What I am suggesting is that taking a shorter mortgage term at a lower interest rate is a better idea due to the thousands you save in the point spread, and even if you need to refinance after that time and rates are higher, you will still have paid off more of your principle in the interim, thereby lowering the amount you owe, and the less the higher interest rate is applicable to.
For example, a 3 year term on a $300K mortgage would leave you owing $290,227.84 at 7.125% (monthly payment of $2001.22) vs $289,551.02 at 6.75% (monthly payment of $1927.28). While the principle remaining doesn't seem much different, the payment is, and could mean shortening the amortization while maintaining the same monthly payment. This reduces your principle to $285,684.97 with a 27 year amortization vs 30, with an increase of $19 per month at the lower interest rate, resulting in owing $5000 less at the end of three years.
A shorter term also allows you more flexibility later on should you decide to change the amortization, or lock in to one rate. With the current economic climate, rates aren't going to move significantly enough to warrant locking into a higher rate over a longer term.
Up here in Canada our short term mortgages are running from 5.5% to 6.75% for closed 1 to 3 year mortgages. You could be looking at significant savings shaving 3 percent off your mortgage, especially if you also shorten the amortization.
------------------
Link Removed | Burt Lancaster is Link Removed | dOc

 

[Luc]

Thank you all for your inputs. I will keep those points in mind.