Author Topic: Refinance - $500 life lesson  (Read 2691 times)

boyerbt

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Refinance - $500 life lesson
« on: April 10, 2017, 12:11:43 PM »
I believe that I have incurred a $500 fee and life lesson about always reviewing the numbers before moving forward. Please see below and let me know if my thinking is correct.

I purchased a home in 2012 at $107k with essentially no money down so I was stuck with PMI. Fast forward five years and I have not missed a payment and the PMI is an irritating fee so I begin going through the refinancing steps to eliminate the PMI ($90/month). The loan generator tells me that my new amount will be roughly $100 cheaper per month on a 7/1 ARM (I don't plan on living in the house beyond another five years) with no money out of pocket and that the $500 appraisal fee will even be reimbursed at the time of closing. Today I got a call from the loan company that I needed to submit some additional paperwork and it got me thinking to review all the information again. The new loan amount will be for $102k and the current balance on my loan is 96k. I am effectively just trading the PMI per monthly cost into an upfront loan amount increase correct?

Is there any reason to proceed with the loan refinance? At this point it seems that there isn't really an upside to this especially because the loan amount is increasing and I do not plan on living there long term nor do I plan on paying down the amount aggressively. Should I just accept the $500 appraisal fee now as a life lesson and move on?

lisa_mustache

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Re: Refinance - $500 life lesson
« Reply #1 on: April 10, 2017, 12:19:12 PM »
So your appraisal showed that your loan-to-value is still more than 80%?  If you can't drop the PMI, I wouldn't roll it into a higher principal myself, but I'm no expert.

Crappy!

solon

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Re: Refinance - $500 life lesson
« Reply #2 on: April 10, 2017, 12:25:02 PM »
Why does the new loan have a higher principle than the old loan? Is it just closing costs?

neo von retorch

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Re: Refinance - $500 life lesson
« Reply #3 on: April 10, 2017, 12:26:05 PM »
I believe that I have incurred a $500 fee and life lesson about always reviewing the numbers before moving forward. Please see below and let me know if my thinking is correct.

I purchased a home in 2012 at $107k with essentially no money down so I was stuck with PMI. Fast forward five years and I have not missed a payment and the PMI is an irritating fee so I begin going through the refinancing steps to eliminate the PMI ($90/month). The loan generator tells me that my new amount will be roughly $100 cheaper per month on a 7/1 ARM (I don't plan on living in the house beyond another five years) with no money out of pocket and that the $500 appraisal fee will even be reimbursed at the time of closing. Today I got a call from the loan company that I needed to submit some additional paperwork and it got me thinking to review all the information again. The new loan amount will be for $102k and the current balance on my loan is 96k. I am effectively just trading the PMI per monthly cost into an upfront loan amount increase correct?

Is there any reason to proceed with the loan refinance? At this point it seems that there isn't really an upside to this especially because the loan amount is increasing and I do not plan on living there long term nor do I plan on paying down the amount aggressively. Should I just accept the $500 appraisal fee now as a life lesson and move on?

Clever - saying "no money out of pocket", but that refinance is costing you $6,000! No thanks. Would take you 5.5 years (not including opportunity cost) to make up the difference. So no, I don't see how this refinance makes any sense.

boyerbt

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Re: Refinance - $500 life lesson
« Reply #4 on: April 10, 2017, 12:33:21 PM »
Why does the new loan have a higher principle than the old loan? Is it just closing costs?

Yes, the additional loan amount is due to the closing costs being added into the total loan amount. It is funny because I was just talking about a recent car loan thread on MMM on someone got a call from a dealership to trade in a slightly used truck and his/her monthly payment was going to come down a bit. It didn't hit me right then and there but now it appears that I was walking right into a very similar situation.

solon

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Re: Refinance - $500 life lesson
« Reply #5 on: April 10, 2017, 12:39:39 PM »
Why does the new loan have a higher principle than the old loan? Is it just closing costs?

Yes, the additional loan amount is due to the closing costs being added into the total loan amount. It is funny because I was just talking about a recent car loan thread on MMM on someone got a call from a dealership to trade in a slightly used truck and his/her monthly payment was going to come down a bit. It didn't hit me right then and there but now it appears that I was walking right into a very similar situation.

I owned a house a while back and I kept refinancing every 2-3 years. I kept getting lower rates and lower payments. But when I tried to sell the house, I realized the principle hadn't gone down at all, because the closing costs from all those refi's were rolled in. I managed to sell the house, but didn't walk away from the table with any money.

neo von retorch

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Re: Refinance - $500 life lesson
« Reply #6 on: April 10, 2017, 12:51:04 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

boyerbt

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Re: Refinance - $500 life lesson
« Reply #7 on: April 10, 2017, 01:01:17 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

No, my current mortgage company has been less than helpful with any of this so I was looking outside to other companies. The interest rate was competitive for the market as I was researching that but the new appraisal amount was less than I expected and is at 83% LTV so trying to work with my current mortgage company won't work.

frugaliknowit

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Re: Refinance - $500 life lesson
« Reply #8 on: April 10, 2017, 01:14:13 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

No, my current mortgage company has been less than helpful with any of this so I was looking outside to other companies. The interest rate was competitive for the market as I was researching that but the new appraisal amount was less than I expected and is at 83% LTV so trying to work with my current mortgage company won't work.

Can't you just "throw" 3% in to get rid of the PMI?

boyerbt

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Re: Refinance - $500 life lesson
« Reply #9 on: April 10, 2017, 01:26:31 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

No, my current mortgage company has been less than helpful with any of this so I was looking outside to other companies. The interest rate was competitive for the market as I was researching that but the new appraisal amount was less than I expected and is at 83% LTV so trying to work with my current mortgage company won't work.

Can't you just "throw" 3% in to get rid of the PMI?

If my current mortgage company would waive the PMI based on the new appraisal along with the additional funds in lieu of a refinance I would do it. I need to contact them again to check on this.

gardeningandgreen

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Re: Refinance - $500 life lesson
« Reply #10 on: April 10, 2017, 03:57:53 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

No, my current mortgage company has been less than helpful with any of this so I was looking outside to other companies. The interest rate was competitive for the market as I was researching that but the new appraisal amount was less than I expected and is at 83% LTV so trying to work with my current mortgage company won't work.

Can't you just "throw" 3% in to get rid of the PMI?

If my current mortgage company would waive the PMI based on the new appraisal along with the additional funds in lieu of a refinance I would do it. I need to contact them again to check on this.

They should get rid of the PMI if you do this as long as the appraisal meets their guidelines. The other option would be to look at a no cost refi(truly no cost ones do exist) Basically the interest rate is slightly higher but it costs you nothing out of pocket including the appraisal(moot point now though).

Gone_Hiking

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Re: Refinance - $500 life lesson
« Reply #11 on: April 10, 2017, 07:29:59 PM »
Is this a refinance with the same bank?
If so, having done the appraisal, is there any chance you qualify to have the PMI dropped, or are you still above 80% LTV?

Is the interest rate (much) better? (Have you shopped around to find a better rate with lower or no closing costs?)

No, my current mortgage company has been less than helpful with any of this so I was looking outside to other companies. The interest rate was competitive for the market as I was researching that but the new appraisal amount was less than I expected and is at 83% LTV so trying to work with my current mortgage company won't work.

Can't you just "throw" 3% in to get rid of the PMI?

If my current mortgage company would waive the PMI based on the new appraisal along with the additional funds in lieu of a refinance I would do it. I need to contact them again to check on this.

By law, the mortgage company is required to drop PMI once the balance drops to 78% LTV based on the original value of the house - no new appraisal is needed.  If you have 5% of the house value that you can throw into the kitty, this might be the easiest way to drop PMI.