Author Topic: How am I being screwed on a refinance offer?  (Read 579 times)

pnw_guy

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How am I being screwed on a refinance offer?
« on: January 04, 2021, 08:45:48 PM »
Bought a house last year with an interest rate in the low 3% range. I recently got contacted by my lender with an offer to refinance and save roughly a half a percentage point in interest. This reduction in interest will save roughly $150 a month.

Also, the entire cost in terms of closing costs, fee's, etc. is only about $100 due at closing. So, on paper this seems like a no brainer, right?

I know that with my lender contacting me out of the blue and offering to do this refinance that I'm being screwed somehow but I'm just not sure how. Any ideas? Any reason I wouldn't want to make this move?

IsThisAGoodUsername

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Re: How am I being screwed on a refinance offer?
« Reply #1 on: January 04, 2021, 09:02:23 PM »
$100 closing?!?  No way.  There must be other administrative, document, preparation, title, inspection, days that end in Y, lunar eclipse, solar eclipse, rotating your tires, undercoat rust protection, and other fees that aren't included in the closing costs but rather rolled into the mortgage (and thus generating interest). THAT'S how you're getting screwed.
« Last Edit: January 04, 2021, 09:04:56 PM by IsThisAGoodUsername »

pnw_guy

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Re: How am I being screwed on a refinance offer?
« Reply #2 on: January 04, 2021, 09:07:16 PM »
$100 closing?!?  No way.  There must be other administrative, document, preparation, title, inspection, days that end in Y, lunar eclipse, solar eclipse, rotating your tires, undercoat rust protection, and other fees that aren't included in the closing costs but rather rolled into the mortgage (and thus generating interest). THAT'S how you're getting screwed.

I think the true costs are like $3300 to close but I'm getting "lender credits" to cover these. $100 is what would be what's still left for me to cover.

Should have clarified that, sorry

Frankies Girl

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Re: How am I being screwed on a refinance offer?
« Reply #3 on: January 04, 2021, 09:35:56 PM »
I had something like this about a decade ago. Lender out of the blue offered me a zero closing cost refi that knocked the rate down like 2% and removed the PMI to boot. Kept asking what the catch was and they kept repeating they were just trying to offer a good deal for loyal customers that had a stellar repayment history.

Turns out they got caught doing some shady things regarding mortgages and part of the settlement was the were required to offer free refinancing to a block of customers.

I'd get all details in writing and fine tooth comb it to see if there are any fees hidden in the fine print. Worst case, you are just out a few hours' worth of reading.

bacchi

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Re: How am I being screwed on a refinance offer?
« Reply #4 on: January 04, 2021, 09:40:22 PM »
Rates are low. They could just be trying to keep you as a customer.

But they're trying to screw you over. :)

pnw_guy

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Re: How am I being screwed on a refinance offer?
« Reply #5 on: January 04, 2021, 10:11:33 PM »
Rates are low. They could just be trying to keep you as a customer.

But they're trying to screw you over. :)

Yup. I know that there's no such thing as a free lunch.

Taran Wanderer

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Re: How am I being screwed on a refinance offer?
« Reply #6 on: January 04, 2021, 10:40:15 PM »
We had a refi from Chase in 2010 or so that was similar. I knew the new rate wasn’t the best possible, but it was better, and I suspect it had to do with cleaning up bad paperwork on their end. That one was free to us.

On a different property, we just did an interest rate modification with the current lender that cost us $250. The loan originated last year, but interest rates dropped so much it made sense to refinance. In this case, I contacted them to initiate refinancing, and they offered the rate modification instead.

In both cases, the lender kept us, our up front cost was low or zero, and we knew we could have eked out a slightly lower rate by going elsewhere. The deal worked for us, though.

clarkfan1979

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Re: How am I being screwed on a refinance offer?
« Reply #7 on: January 05, 2021, 01:25:09 PM »
I just refinanced my primary house. It was a 227K loan at 2.875%. I paid $2550 in lender fees, $950 for title and $100 in recording fees. I did not have to pay for an appraisal. This is $3600 total. I am not including pre-paid escrow fees because it is not a real cost.

If the lender can get you to commit to a rate that is higher than the current market rates, they might be able to offer lender credits, which might make it close to free. It's kind of like paying a fee to buy down the rate, but it's the opposite.