The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Secret Stache on June 21, 2012, 06:23:43 PM
-
I am looking into refinancing my home and I received some quotes from my current mortgage holder (WellsFargo). I like the rates but the closing costs seem crazy high. I was quoted $4400 that they would happily roll into the mortgage. I am looking at a 7/1 ARM at 2.625% amortized @ 30 years among other but this one seems best for me as it would reduce my payment by $250/month. I plan to have it paid off at the end of 2014 by applying 3 lump payments at the end of each year. I understand this is a controversial topic but this is what I will be doing for this property.
Now, I've heard of folks getting refinance deals for next to nothing. Is WF really just sticking it to me or is this the going rate. I've listed the fees below. I would appreciate anyone's thoughts or tactics for negotiating this down.
Details:
Current Balance: $108,972
Current Interest rate 5.5%
Property Tax rate 3.6%
New rate 7/1 ARM 2.625%
New Balance $111k (this is the $108k from above minus $3k from my escrow + 4k for closing and $2k for taxes from Jan to now - or I could just pay it up front)
Origination Charge $2300
appraisal $395
Flood Life of Loan Fee $19
Tax Service Fee $105
Title Ins - Lender Coverage $901.74
TX Policy Guaranty Fee $2
Endorsement - Environmnt Lien $25
Endorsement ARM $20
Endorseemnt Rest/Covenants $45.09
Closing/Escrow/Settlement $450
Recording Fee - Releases $56
Recording Fee - MRTG/DOT $140
-
It looks like Wells Fargo is charging two points (two percent of the mortgage amount) to buy down the rate on this loan. This is too high a premium in the current market for that rate. Banks take advantage of the existing customer relationships in pricing loans, so comparison shopping will save you money. Shop this loan to the better credit unions in your area and get referrals to a couple of reputable mortgage brokers. Your loan is likely going to be sold to Freddie/Fannie no matter who originates it, so there is no benefit to using your current servicer as the originator of the new loan, no matter what nonsense they tell you about customer service.
The retail side of a large bank typically won't negotiate pricing. Once you have several good faith estimates, you can show them the best one and ask them to match the price. It never hurts to ask, and you will learn exactly how much they value your business by doing so.
Also, lenders typically don't transfer escrows between loans. Did they promise to do this or are you assuming they will? You may have to come up with the $3k and wait for the refund from the escrow for the existing loan.
-
Wells Fargo refinanced me 5 months ago without any fees, but I don't know if you can do that program, it was an invite they sent me. Doesn't hurt to call and let them know the cost for this is just unacceptable and you are shopping around for something else. Maybe they can find a better plan in their system that works for you.
Definitely doesn't sound like a good deal to me, paying that much to refinance removes all the benefit of getting the new rate. I would shop around with credit unions and local banks as well as mortgage brokers in your area. Also ask around for recommendations from friends in the area you trust.
-
I just refi'd a 5/1 30 year ARM @3.125% with no points and the refi co pays almost all the closing costs (you could say I'm getting negative points). Shop around. WF are screwing you, IMHO.
-
Have you run the math to see if that's better? The interest rate is dramatically less important if the loan is only going to be around for 30 months. (Relatedly, I've seen other posters note that instead of rolling closing costs into the balance you can roll them into the rate. I don't know if this is what Mr. Mark is referring to or not, but it would be ideal for your situation.)
-
Quicken Loans is NOT a low cost lender. You can do better.
Your best bet is to shop the loan locally and see if you can come up with a no-cost or very low cost option if getting the rate down at minimum cost is important to you. If a lender pays for your closing costs and you get a "no cost" refinance, it's usually because they are being paid by the investor that buys the loan for a locking you into a higher interest rate. The company that gives you the loan will turn around and sell the loan to an investor, and they get a premium for the higher rate.
An ethical originator will use most of that premium to offer you a competitive deal on costs. Less ethical originators keep most of the spread for themselves. That's why it's important to get multiple loan quotes. That's how you figure out who is more on your side in the deal. You can also find out what the "cost" of a lower rate is by asking how much the rate is reduced for one or two points versus no points.
Knowing your credit score before you start the process is important. Pricing is score dependent, and can vary dramatically if you are on one side or the other of a cut-off point.
In your shoes, unless I already had the pay-off cash in hand, I would increase my flexibility by going for a longer term with a fixed rate. That way, if things changed before the scheduled pay-off, you would not be stuck in an adjustable rate product at the end of the lock period. You should be able to get your interest rate down into the mid-threes at a low cost for 15 years and retain your options.
-
http://www.bankrate.com/funnel/mortgages/mortgage-results.aspx?prods=220&points=&loan=109000&market=16&perc=20&ic_id=CR_searchMtgRefiStateCity_refinance_7/1ARM (http://www.bankrate.com/funnel/mortgages/mortgage-results.aspx?prods=220&points=&loan=109000&market=16&perc=20&ic_id=CR_searchMtgRefiStateCity_refinance_7/1ARM)
Bankrate.com is showing as low as 2.768 in Houston for a $109k refi.
ingdirect.com is showing 2.8 for a 5-year, which if you're paying off in 3 shouldn't make too much difference.
We did a refi a few months ago through a broker with no costs out of our pocket, save the interest for the existing loan for the month we closed in. But obviously, different states have different programs available.
Why are they making you do another appraisal if you aren't trying to pull money out? Why are they re-insuring your title? Genuine questions here, not being condescending. :)
-
The cashflow delta is what counts. The balance between fees and rates will depend on how long you intend to keep the mortgage - the longer your expected timeframe, the more important the rate. As we will almost certainly be selling our house in a couple of years, I wanted no fees, so I'm making on the deal from month 1. Note, with a credit score over 800 I would have got 2.8%... :-D
And agree with that last point: WF shouldn't need to redo the appraisal or title as they wrote the original note!
You should get quotes on-line for the same type, and compare. But be prepared for a flood of responses as soon as you hit 'submit'.
-
I'll have to dig up my paperwork when I get home, but I'm pretty sure we didn't have to re-insure title. If we did, the lender paid for it. I KNOW we didn't have to do the appraisal.
We did some kind of streamline refi, which is probably very different from what you are looking to do, but it never hurts to question these clowns!
-
In fact your payoff would be a little longer, cos you could have invested the closing costs. In the current market you should be able to refi without fees for a lot less than 5.5% with those high credit scores.
-
Have you considered a home equity loan? I recently refinanced to a 1.99% 5-year HEL (https://www.penfed.org/home-equity-loan/) at Pentagon Federal Credit Union with no closing costs.
Given your low balance and short payoff timeframe, you should be able to handle the payments of the short 5-year amortization period. However, if you're also trying to reduce your monthly payments, but you can pay it off using yearly lump sum payments, you can effect something similar with a bit of financial hackery:
- Take out two loans: $109k from a PenFed 5-year HEL and a no-closing costs HELOC (e.g. from Hanscom FCU (http://www.hfcu.org/current_rates_and_yields.html) or PenFed (https://www.penfed.org/Equity-Line-of-Credit/)).
- For the rest of this year, pay the HEL with monthly withdrawals from the line of credit.
- At the end of 2012, use your lump sum to pay off the HELOC, and make advance payments on the HEL for at least the rest of 2013.
- At the end of 2013, use your lump sum to make more advance payments on the HEL for at least the rest of 2013.
- At the end of 2014, pay off the HEL completely.
-
Matt,
I'm a bit late to the party, but a Penfed 5/5 ARM would be pretty sweet for your situation, I think. The current rate is 2.75% and they cover closing costs. Our refinance closed with them in July and I'm very happy with the loan, though closing was more leisurely than with the broker we used for our last refinance.
-
I just refi'd a 5/1 30 year ARM @3.125% with no points and the refi co pays almost all the closing costs (you could say I'm getting negative points). Shop around. WF are screwing you, IMHO.
Okay.... we are seeing historically low interest rates.
Why the heck would you get an adjustable mortgage when rates have almost nowhere to go but up? The only good reason I see is if you plan to pay it off before it can adjust much, but if that's the case...
I'm paying a flat 3.00% on a fixed 10-year mortgage. Closing costs were well under $1,000 for my refi at a local credit union. If I did that refi today, it would be all of 2.76% APR.