Home refinancing

[Dave Siciliano]

So, I call my existing mortgage company on one of the houses I own to see if there is any benefit to refinancing with them (USAA in this case). Short version is no. They charge all the origination fees associated with a new loan, even though it is existing: new title policy, insurance a year in advance, points, credit check, etc. So, even though I would go from a 5.875% loan down to 4.635%, it would take 90 months to benefit because of all the origination fees.

This is one big rip off---period. There is no reason to have all these up front costs to lower the rate on an existing loan except all the originators want a pay day.

I wonder if the current administration understands how all this works. Good luck to those that need to refinance because they can't afford the payments now.

Best,

Dave

 

[TangoWhiskey]

I agree with you. Of course, they'll often offer to "roll all the costs into the new loan".... which is like giving a guy a black eye and then offering him mascara.

 

[PittsDriver]

So, I call my existing mortgage company on one of the houses I own to see if there is any benefit to refinancing with them (USAA in this case). Short version is no. They charge all the origination fees associated with a new loan, even though it is existing: new title policy, insurance a year in advance, points, credit check, etc. So, even though I would go from a 5.875% loan down to 4.635%, it would take 90 months to benefit because of all the origination fees.

This is one big rip off---period. There is no reason to have all these up front costs to lower the rate on an existing loan except all the originators want a pay day.

I wonder if the current administration understands how all this works. Good luck to those that need to refinance because they can't afford the payments now.

Best,

Dave

Are you sure you aren't including some inappropriate numbers in your payoff calculation? For example, the money you're required to come up with at closing for your escrows is still your money to pay your bills. You'll be getting back all the money in your old escrows as well to offset these amounts. I just refinanced with BoA and even buying the rate down with 7/8ths of a point, my payback on the refi was about a year going from 5&7/8ths to 4&3/4ths.

Shop around and you can do better. Everything is negotiable even with them being slammed with a backlog of refi's. I got a quarter point lower just by suggesting that I might refi with another bank.

 

[Dave Siciliano]

That's what they did Troy; they'd roll it into the new loan and in 90 month voila! I would reach my break even point.

Think of how much faster that would come with a small administrative fee for paper work; no new title or origination costs, etc. I was offered that by another lender on another home. Rather than have the old loan paid off and lose a good credit customer, they would lower the rate with minimal fees on the existing loan.

Best,

Dave

 

[Dave Siciliano]

Are you sure you aren't including some inappropriate numbers in your payoff calculation? For example, the money you're required to come up with at closing for your escrows is still your money to pay your bills. You'll be getting back all the money in your old escrows as well to offset these amounts. I just refinanced with BoA and even buying the rate down with 7/8ths of a point, my payback on the refi was about a year going from 5&7/8ths to 4&3/4ths.

Shop around and you can do better. Everything is negotiable even with them being slammed with a backlog of refi's. I got a quarter point lower just by suggesting that I might refi with another bank.

Thanks, no escrow accounts on this loan. This is a new title policy; 1.875 points which is $2,600 and other origination fees.

Best,

Dave

 

[PittsDriver]

*shrug* I just rechecked my HUD1 form and all in, with BoA, the refinancing fees were about $1,000. Add to that the buydown that was my option to purchase and I end up in a new loan that gets it's costs payed for in about 9 months. After that, it's all gravy. Like I said, maybe you need to shop around?

 

[Dave Siciliano]

Thanks! USAA is usually pretty good. I called them first because they are the existing lender. What rate did you get?

Best,

Dave

 

[astanley]

Thanks! USAA is usually pretty good. I called them first because they are the existing lender. What rate did you get?

Best,

Dave

I really, really wonder what the costs are to handle the loan. $2,600 seems #$@#$ absurd.

Cheers,

-Andrew

 

[Dave Siciliano]

Well, another fella with citi told me he got a 4.75% with existing title and no escrow. I called Citi:

well Citimortage is too busy for me. They asked if I have a distressed situation: no. Citi employee: no. Smith Barney account: no. Loan that was formerly restructured: no. Sorry, we're too busy with those other folks to call you. Call this other bank.

Of course, they have $3,500 in origination fees.

Sigh, it just doesn't pay to be a good credit and current with your loan with these folks <g>

Best,

Dave

 

[BigAL]

I'm bet'n that origination fees incl. an appraisal. Shop the loan and appraise assets on the side, thats where the money is and will be for a while.

All these houses' the banks own........buyers market........interest rates what they are today..............somebody is gonna get rich.

 

[wsuffa]

Dave,

Small, local bank.

When I was in SA, I dealt with a small local bank (now bought by a bigger regional player, which is when things went downhill) - I met with the CEO personally. I refied twice to get a lower rate. First time, they rolled it over for the cost of the legal work (about $250 - $300). The second time, they charged something else - an appraisal fee, maybe - for a cost of $1200. Paid off in a matter of a few months or less. The key reason was the bank kept the loan in their own portfolio (I'm sure I couldn't have rolled it again after it was bought).

USAA's good about a lot of things, but I don't think they keep the mortgages in their portfolio. That means they have to meet the full underwriting standards each time they originate or refi a loan.

There are still a handful of banks that will keep loans in their own portfolio instead of packaging and selling them. Find one of those and things will be much better.

 

[Dave Siciliano]

Thanks Bill. Is there some reasonable manner in which to locate them. Of the 31 lenders I called to refinance my subdivision, none stood out in that manner.

Best,

Dave

 

[John Baker]

It wasn't so long ago we refinanced our homes not to save money, but more to do something sensible, like buy a new airplane.

John

 

[wabower]

Just wait until you buy your next GM car.

So, I call my existing mortgage company on one of the houses I own to see if there is any benefit to refinancing with them (USAA in this case). Short version is no. They charge all the origination fees associated with a new loan, even though it is existing: new title policy, insurance a year in advance, points, credit check, etc. So, even though I would go from a 5.875% loan down to 4.635%, it would take 90 months to benefit because of all the origination fees.

This is one big rip off---period. There is no reason to have all these up front costs to lower the rate on an existing loan except all the originators want a pay day.

I wonder if the current administration understands how all this works. Good luck to those that need to refinance because they can't afford the payments now.

Best,

Dave

 

[wsuffa]

Thanks Bill. Is there some reasonable manner in which to locate them. Of the 31 lenders I called to refinance my subdivision, none stood out in that manner.

Best,

Dave

Dave, hard to tell. You're looking for a community bank - I found the one in SA by word-of-mouth referral. In DC, Burke and Herbert is an example. You're going to be looking for a smaller bank that might hold portfolio loans. Most won't these days (for a lot of reasons), but if you ask around you might just find one.

Word of mouth...

 

[Dave Siciliano]

Thanks Bill and for the off list suggestions for those that sent them. I'll start pokin around.

Best,

Dave

 

[sba55]

I wonder if the current administration understands how all this works. Good luck to those that need to refinance because they can't afford the payments now.

Off topic - the sad fact is that this administration has some excellent economists working for them. One of my former professors at UC Berkeley, Christina Romer, is the chair for Obama's council of economic advisors. She knows this stuff very well. Sadly, however, good economic policy and politics are mostly incompatible....

-Felix

 

[wby0nder]

My small local credit union allowed us to re-finance with a home equity loan a few years ago with NO CLOSING COSTS. We might have paid for an appraisal but it wasn't much, a couple hundred.

 

[PittsDriver]

Thanks! USAA is usually pretty good. I called them first because they are the existing lender. What rate did you get?

I just closed last Friday at 4.75%, 30 year, jumbo. This is my primary residence and I'm wondering if you're getting the brush off because yours is an investment property/second home? I did get the low refi cost option by staying with the same lender and not changing the title.

 

[mikea]

I just closed last Friday at 4.75%, 30 year, jumbo. This is my primary residence and I'm wondering if you're getting the brush off because yours is an investment property/second home? I did get the low refi cost option by staying with the same lender and not changing the title.

Bet that still didn't save you from ponying up $250 again for title insurance.

Cook County has a fairly heavy title transfer tax. Bet they make it so you pay that, too.

 

[wabower]

If the most logical and fundamental decision can't get the votes, there is never any question about whether the votes will change, just which one of the less workable solution must be presented. We're toast, cooked by our own hand.

Off topic - the sad fact is that this administration has some excellent economists working for them. One of my former professors at UC Berkeley, Christina Romer, is the chair for Obama's council of economic advisors. She knows this stuff very well. Sadly, however, good economic policy and politics are mostly incompatible....

-Felix

 

[NW_Pilot]

I am wondering how many years you all had left on your original note?

Say if you had 20 years to go on your original note and to save 1 point in interest you refi on a 30 year note in the long run you will pay more with the new note than sticking with the original.

Do the math...

 

[NetSpeaker]

You might want to recheck your numbers. Based on what you posted, if $2,600 is 1.875 points, then the loan amount is around $138,000.

That would mean your refi would save you $1,711 per year in interest. In order for that to take 90 months to payback, the total refi fees would have to be $12,800!
If they are really charging 12 grand to refi, you need to be talking to someone else. If they aren't charging 12 grand, you need to recalculate your payback period.

Two months ago I refi'd my primary residence at 4.5% and the payback was 5 months.

With the current government spending orgy, borrowing by the government will have to drive up long term interest rates when we come out of the recession (whenever that occurs). Anyone who will be in their home for more than a couple of years should lock in these sub-5% rates if they can qualify for the loan at reasonable costs. Probably the surest long term financial bet available today.

 

[Dave Siciliano]

I just closed last Friday at 4.75%, 30 year, jumbo. This is my primary residence and I'm wondering if you're getting the brush off because yours is an investment property/second home? I did get the low refi cost option by staying with the same lender and not changing the title.

Thanks, they never got to the point where they asked. The USAA loan is on my home; another loan with Citi is investment property (where my Son is and my office).

Best,

Dave

 

[Dave Siciliano]

You might want to recheck your numbers. Based on what you posted, if $2,600 is 1.875 points, then the loan amount is around $138,000.

That would mean your refi would save you $1,711 per year in interest. In order for that to take 90 months to payback, the total refi fees would have to be $12,800!
If they are really charging 12 grand to refi, you need to be talking to someone else. If they aren't charging 12 grand, you need to recalculate your payback period.

Two months ago I refi'd my primary residence at 4.5% and the payback was 5 months.

With the current government spending orgy, borrowing by the government will have to drive up long term interest rates when we come out of the recession (whenever that occurs). Anyone who will be in their home for more than a couple of years should lock in these sub-5% rates if they can qualify for the loan at reasonable costs. Probably the surest long term financial bet available today.

Thanks for pointing that out. Your numbers were pretty close. I didn't compute payments with amortization, just interest. But even looking at that, I would save $1,671 per year. Total refinance costs he quoted were $4,500. It was his calculations that showed a 90 month payback. I compute a 33 month payback; so, I don't know where he came up with 90.

Doesn't matter. I won't pay $4,500 to refinance this home at under 70% LTV and paid ahead for the entire year. I think a lot of folks err in just looking at months to payback. Most of these costs simply don't need to be paid! Why am I working 33 months to pay for origination fees on a seasoned loan where a payment has never been missed--actually, it's paid in advance. In addition to the cost is all the time and frustration it takes to do these if one reads all the documents. I'll shop around; there have to be better situations. Just frustrating to go to your existing lender and get treated like you're an unknown party.

In addition, they wanted insurance paid ahead a year. That's nuts because I don't have an escrow account and have kept that current for the many years I've had the home. They also wanted RE taxes paid in advance; sorry, no way. This is stupid. After the next payment, there is no escrow account.

Maybe the loan officer just sensed my angst and botched the calculation <g>

Best,

Dave

 

[Dave Siciliano]

Off topic - the sad fact is that this administration has some excellent economists working for them. One of my former professors at UC Berkeley, Christina Romer, is the chair for Obama's council of economic advisors. She knows this stuff very well. Sadly, however, good economic policy and politics are mostly incompatible....

-Felix

The current administration has hired some top talent from academia. Wonderful, bright folks, but many of them have never run a business or had to make payroll. There is a big difference between think tank stuff and being out where the rubber meets the road. 'Course, the Pres. has never been in the latter circumstance either. Big difference between wonderful ideas and actually getting things implemented that work.

Many people much brighter than me that could never get the things done that I have.

Best,

Dave

 

[mikea]

The current administration has hired some top talent from academia. Wonderful, bright folks, but many of them have never run a business or had to make payroll. There is a big difference between think tank stuff and being out where the rubber meets the road. 'Course, the Pres. has never been in the latter circumstance either. Big difference between wonderful ideas and actually getting things implemented that work.

Many people much brighter than me that could never get the things done that I have.

Best,

Dave

Tempting moving off to SZ...like Hank Paulson?

 

[rpadula]

I'll shop around; there have to be better situations. Just frustrating to go to your existing lender and get treated like you're an unknown party.

Well Dave, now they're just enforcing some underwriting standards...after doing, like, NONE, for the past four years!

 

[Dave Siciliano]

Tempting moving off to SZ...like Hank Paulson?

Sorry. I'll stay on topic henceforth.

Best,

Dave

 

[Lawreston]

Ah, yes; these banks are always thinking, and not necessarily of "us." Back in 2007 I bought this Georgetown house before I put the Topsham house on the market. I paid about 70% in cash and floated the remainder. There was the usual required appraisal, title search, and stuff. Within six months I paid off the note(whose collateral was the vacant Topsham house which was already free and clear). So with both properties in the clear I thought I'd get a Home Equity-LOC on the new house, to use only if something were to "come up."

The banker said they'd have to do a title search and a new appraisal. "What the hell for? You just did them 7 or 8 months ago." "Oh, it's required on any new application."

"Well, that's a bunch of BS." The banker decided that they could do without the title search; and that if I could get a copy of the latest tax bill they could use that in lieu
of a new appraisal. Well la-dee-da. By that time a new tax year was in effect. The requested latest tax bill showed a valuation $17,000 higher than when I bought the property. The bank accepted the new information. HE-LOC = 3.75%.

HR (and the banks are still a bunch of piranhas)

 

[PittsDriver]

Bet that still didn't save you from ponying up $250 again for title insurance.

You'd lose that bet. Here's the breakdown of "fees":

Lender Closing Fee: $775
Settlement Fee: $125
Courier Fee: $ 35
Recording Fee: $ 95
--------------
$1,030

Everything else was reestablishing the escrows and my optional buydown of 7/8ths of a point.

 

[NetSpeaker]

Anything around a year or less in payback period is probably worth doing for anyone planning to keep the property at least a few years.

I agree with you that a 33-month payback is out of line, and a 70% loan-to-value ratio should not be that costly. It sounds like this might not be your primary residence, though, and that will usually raise the costs a bit.

You should, however, shop around. Diffferent lenders have different portfolio needs. USAA is one of the responsible lenders and they may be less needy than others. There are a lot of institutions holding lots of paper that isn't backed up by any equity. Some of those may be more agressive at making loans with a 70% LTV to balance their loan portfolio.