Author Topic: Smart or not: refinance with max cash out  (Read 7434 times)

jdchmiel

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Smart or not: refinance with max cash out
« on: December 19, 2012, 12:51:10 PM »
Wife and I got married, tried to sell her townhouse, ended up renting it out.  Our house I have been renovating for years has enough equity and is finally in a state of completion enough that I can refinance it.  Appraisal gave us 209k but market value is prob near 250k. balance on 6% 30 yr fixed is 109k.  Balance on the townhouse and value are both about 90k.  The mortgage broker I am working with keeps pissing me off, but it looks like we will be able to get a 15yr fixed @ 2.875 for 152k.  I have no idea why 152k is the most we can do, something to do with points and lender credits and all sorts of doublespeak which she tries to hide a 3k increase in principal of the loan, and a slightly higher rate than I see from many companies on zillow.  Anyways, going from a 30 yr to a 15 yr is a given, the monthly cost is almost the same if we do not take any cash out.  The pat I am hesitant about is taking the additional 40k out and paying it towards the townhouse rental we have.  That mortgage was done though BB&T under some special 100LTV plan that blocks usage of any current loan modification programs from the govt.  It is 5.5% fixed 30 year.  Is it smart to move 40k from that loan to our home loan at a 2.875% rate?  On paper it looks good to me, 5.5 -> 2.875 = free 2.6%.  In practice it means our monthly bils will go up some as we are forcing ourselves to pay ourselves via the larger payments towards the principal.  We do not have any other debt ( cars, credit cards, etc) other than about 20k in student loans which are at 2 or 3 something %..
Other options for the money could be considered, such as buying more rental property, but I would really psychologically like to get down to a single mortgage, and I think paying off about half of it  would help kick stat us into paying it down as quickly as practical ( without tapping into maxing out 2 roths and my 401k each year).

So I think it is a good idea, and it is what I plan to do / want to do, but I want a sanity check to be sure I am not "being my own worst enemy"

tooqk4u22

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Re: Smart or not: refinance with max cash out
« Reply #1 on: December 19, 2012, 01:03:03 PM »
Makes sense to me, money is fungeable so why pay more than you have to.

gooki

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Re: Smart or not: refinance with max cash out
« Reply #2 on: December 19, 2012, 06:50:10 PM »
Yes, al long as you instantly put that money into your investment, and don't piss it away on shit.

Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #3 on: December 19, 2012, 07:17:33 PM »
Are you too far into the process to fire the broker?  Even if you have paid for an appraisal, I would check to see if the cost of another appraisal could get you a better deal.  There is a premium for cash out in there somewhere, but your loan to value is only 73 percent.

I have used equity in my primary to buy and finance rentals, and I think it's a smart way to finance at the lowest cost.  You will reduce your overall interest cost, but not the payment on the townhouse.  The only other thing I might consider doing is paying down the townhouse just to the point I could refinance it at a lower rate.  As a rental the rate will be higher, but significantly less than the 5.5 percent you are paying now.

secondcor521

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Re: Smart or not: refinance with max cash out
« Reply #4 on: December 19, 2012, 07:29:46 PM »
If I could handle the larger payments comfortably, I would do what you're describing.

If not, I would only take out as much as I felt comfortable with and refuse the rest.

2Cor521

James

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Re: Smart or not: refinance with max cash out
« Reply #5 on: December 19, 2012, 08:29:58 PM »
Dump the broker.  They exist to make the process better and find you a better deal than you could on your own.  If you don't trust her, don't do a $152k deal with her!


Yes, it makes sense to take out as much as possible on the loan as long as you are comfortable with the increased payments.

TomTX

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Re: Smart or not: refinance with max cash out
« Reply #6 on: December 19, 2012, 09:13:03 PM »
Dump the broker. No reason to give a several thousand dollar payday to someone you can't trust.

What about your local credit union? What are their prices? Compare a real Good Faith Estimate.

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #7 on: December 26, 2012, 11:30:12 AM »
local credit union is actually a lot higher for mortgage rates than pretty much anywhere else.  Our closing in this friday.  I would not feel right about dropping the process now, but my instinct is to do so...
Good faiuth estimate - I think the fees for some things are asinine:

152,000 amt
15 years term
2.875% rate
????? APR not provided
3,935.00 origination charge <--------- huge wtf red flag for me,
3,506.64 credit for taking 2.875% rate  <----- still kind of wtf
-----------------------------
A) $428.36 total adjusted origination charge

Charges for other services
450 appraisal
30 credit report
775 title service and lenders title insurance <- seems high? They have photocopies of the paperwork from the original purchase of house years ago and originaly said they would not need to charge for it.
89 govt recording fees
602.79 - initial escrow account for property taxes
155 daily interest charges
459 homeowners insurance
----------------
B) $2561.40 sum all other settlement charges

A+B $2,989.76 total settlement charges

The broker chose Acopia Capitol Group for the note, who I have never heard of, although it seems as if they made this decision withibn days of our first meeting, as our home owners insurance got changed to them as the mortgage lein holder last month.. which is suspicious to me, as obviously before closing at that point we had not signed anything.

Does anyone think these numbers are suspect?  It is hard to know what to do with these types of transactions because as a general consumer they are done so infrequently, and it is like dealing with a car salesman - you KNOW they have their best interests in mind, and you KNOW their best interest is 100% opposite of your own best interests.




JohnGalt

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Re: Smart or not: refinance with max cash out
« Reply #8 on: December 26, 2012, 11:50:29 AM »
I can't say whether these fees are reasonable or not - but they don't sound much different from my refinance earlier in the year. 

When I was doing my comparisons - I always made sure to get at just the numbers that were fees.

The escrow, daily interest, and homeowners insurance are all things you would pay anyways.  That puts your actual fees for services at 450 + 30 + 775 + 89 = 1344 + the origination fee (I hated their funky method of charging and crediting to cancel some of it out too) of 428.36 = 1772.36 total cost to refinance. 

I had similar questions and ended up taking them to another broker to get their thoughts.  The answer I got from them was that they probably could have come in with lower fees, but interest rates had gone up since I had locked in my good faith so I was probably better off paying the higher fees to keep the lower interest rate (or waiting to see if interest rates dropped again).  In my case, I went with the higher fees on the already locked in lower right but it might be worth running by a different broker to see what they say.




Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #9 on: December 26, 2012, 11:59:52 AM »
You are being charged over 2.5 percent in origination, then being credited back a portion for accepting an above-market rate.  The GFE should have shown the APR. 

We previously suggested shopping around.  That means using an aggregator site and also shopping around locally.  If your credit union is high, shop others.  The cash-out is the issue that makes your loan different than the standard re-fi.  You still have time to get other quotes.  In your shoes, I would do that.  As in today.

Lender's title insurance is purchased every time you refi.  Your owner's title insurance policy is not.  The title company also charges a fee to handle the transaction (escrow).  The daily interest amount must be wrong unless it's for several days.  How was that calculated?  The homeowner's insurance amount should be what your insurance company charges.  That number should have come from the agent.  The appraisal charge and credit report are reasonable.

In your shoes, I would start dialing for dollars.  You don't know where you stand without getting competitive quotes.

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #10 on: December 26, 2012, 12:05:09 PM »
JohnGalt - I appreciate the response.  I was looking at it this way too - ignore the escrow, insurance, interest as they have to be paid anyways / will be getting a check back from the old lender to close out that old escrow account.  I was also told I would get to skip a mortgage payment, which makes the total cost more palatable as that regular budget item would just go right back into the mortgage as an 'extra' payment.

Another Reader - the interest comment is:
10. Daily interest charges
This charge is for the daily interest on your loan from the day of your settlement until
the first day of the next month or the first day of your normal mortgage payment cycle.
This amount is $11.97 per day for 13 days
(if your settlement is 12/19/2012).
I will check what is on zillow today for rates and call one of them, and see if the other credit union in the area has any better rates.  I am not certain if I can join them though, so will hav to check that too.

Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #11 on: December 26, 2012, 12:20:55 PM »
The daily interest rate is correct on a daily basis but will be less as you are closing on Friday.  It covers the interest until the end of December.  This is why you do not have a January payment.  Mortgage interest is paid in "arrears," or at the end if the month  The February payment will cover the January interest.

The Box Home Loan site has good pricing, and another forum participant used them successfully.  They do easy loans and work well for folks with simple income and asset statements.  I do not know if they do cash out, however.  Most lenders are set up to do simple refi's, and there is a premium for cash out for loans sold to the GSE's.  Zillow is one source of pricing, but there are several others out there. 

JohnGalt

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Re: Smart or not: refinance with max cash out
« Reply #12 on: December 26, 2012, 12:26:02 PM »
If the cash out portion is the problem - have you looked into doing a standard refi (no cash out) followed up by a home equity line?  I have no experience with it personally - but have read that HELOCs are often no fee. 

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #13 on: December 26, 2012, 01:30:24 PM »
JohnGalt - I do not know if the cash out is a problem or not.  I do not se why it is, but that is an option. I am doing the cash out on a lark as it was an idea to pay less total money in interest each month.  I suspect a heloc rate will be higher than the 2.5-2.9 % range that 15 year fixed notes are currently at.

Another Reader - Zillow got me a quote that is about $1800 cheaper with the same 2.875% rate, or a 2.625% at just about the same cost (+/- 100ish).  The Mortgage consultant I talked to was a lot more professional sounding and answered my questions directly without double speak.  the only downside now is that I might have to pay for the appraisal again if I go with another company.  I am giving the current broker a chance to improve their offer right now, otherwise, I think I am going to pull the plug on them.   Also, what is a GSE ?

Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #14 on: December 26, 2012, 02:07:32 PM »
GSE = Government Sponsored Enterprise = Fannie/Freddie.  About 90 percent of mortgage loans today are sold to a government entity.

Ask everyone you talk with how and how much you are paying for cash out and where the charge is reflected.  Fannie and Freddie charge a premium for cash out that is somehow reflected in your price.  If the lenders are not quoting you on cash out, the rate and terms they quote are irrelevant.  Get a good faith estimate from any lender you consider before you decide.  Do check the Box Home Loans website to see if you qualify for their streamline process.  Their rates and fees were very competitive.

Comparison shopping really helps with mortgages.  Knowing what questions to ask lets the loan rep know you understand the process and they can't overcharge you.

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #15 on: December 26, 2012, 02:49:39 PM »
Box Home loans is not in my state.  for giggles I chose texas in a random county and got significantly higher numbers than either of my two sets of numbers.  I think I should go with the lender I got from Zillow - I got those over a phone call, and it is taking into account the cash out refi rate hit.

Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #16 on: December 26, 2012, 03:40:40 PM »
Please get a GFE from the Zillow lender before you cancel the existing loan.  Make sure the lender puts everything in writing.  Also find out WHEN you can lock the rate.  If you have to wait 6 weeks before a new appraisal is made, rates could change.  That could be a factor.  Also see what the lender you are working with now is willing to do.  They may squeeze a little profit out of the loan to keep the deal.

Acopia is a wholesale/correspondent lender.  Your broker gets the money from them and they then will sell the loan to Fannie/Freddie.  Their website is http://myacopia.com/.  This is very common, although I'm not familiar with the company.

In other words, get all those ducks lined up before you make a final decision.

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #17 on: December 27, 2012, 08:30:51 PM »
Good and bad news
- locked 2.625 with lendor off of zillow - Meyers Park
- if I had chosen to go as high as 2.875 that the local broker was giving me, I would have walked away with $.
- have to pay for a 2nd appraisal as they are not transferable

- end result is even ater paying for 2 appraisals, I get .25% lower at the same exact cost.

Another Reader

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Re: Smart or not: refinance with max cash out
« Reply #18 on: December 27, 2012, 08:48:36 PM »
Rates have dropped so that may account for some of the difference.  However, it's worth something to work with a person that explains everything to you in a way you understand and charges a fair price with no double talk.  Hope the rest of the process is as smooth and you get this behind you.  If you ever have to get another mortgage, you will be prepared to shop knowledgeably.

jdchmiel

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Re: Smart or not: refinance with max cash out
« Reply #19 on: December 28, 2012, 10:47:04 AM »
The thing is, this is the 4th or 5th closing I have been through with 3 purchases and a few refinances... It is just wen you only do something every 3-4 years you forget all the details ..

Funny thing is, I gave the local broker a chance to improve their numbers, and she told me he rates had gone up and could not explain his numbers.  I suspect I just ended up getting 1 fewer middleman as this one told me it is a fannae mae direct resell.