no-cost refinance opportunity

[rh71]

We refi'd for "no cost" once before soon after our initial mortgage. The only downside I could see was that the 30-years started over. We're now 7 years into this mortgage and got another letter from our lender that we can refi from 5.875% down to 5.375%, saving us over $200/mo. We also plan on moving out within a year or two so I figure the increased interest wouldn't be a big deal. So am I missing anything on this?

No closing costs. No application fees or appraisal costs. Last time all I had to do was find a notary public.

 

[JEDI]

Originally posted by: rh71
We refi'd for "no cost" once before soon after our initial mortgage. The only downside I could see was that the 30-years started over. We're now 7 years into this mortgage and got another letter from our lender that we can refi from 5.875% down to 5.375%, saving us over $200/mo. We also plan on moving out within a year or two so I figure the increased interest wouldn't be a big deal. So am I missing anything on this?

No closing costs. No application fees or appraisal costs. Last time all I had to do was find a notary public.

no downside if it's truly no cost (ie: penfed's 4.99% refi)

go for it!

 

[OCGuy]

No such thing as a "no closing cost" mortgage. They are raising your rate to make it appear there are no costs.

5.375% is not a good rate right now in most places. You could pay some closing costs and be in the 4s if you are a Fannie/Freddie quality borrower.

Edit: Just checked one of my more average investors, and they would pay the loan officer 2.2pts on the back end to sell you a rate that high.

 

[sjwaste]

You're paying the closing costs in the form of a higher interest rate.

Also, most reputable lenders will give you the option of "restarting" at 360 payments or to amortize over the remaining life of the original loan. If you need a specific bank that does it, I know for sure that USBank does, because I did it.

If you're talking about loans today (10/26), it looks like you're paying about 1/8 point over most of the large lenders' prime, no point 30 year fixed rate. Take the NPV of that 0.125% in interest and that's what you're really paying for "no closing cost" refi.

Still, 5.375% is a historically low rate. If you don't have the cash to refi out of pocket, it's probably worth looking at. BUT you'll want to run the NPV over the premium to see if it pays itself back in a reasonable timeframe.

 

[Jadow]

Originally posted by: rh71
We refi'd for "no cost" once before soon after our initial mortgage. The only downside I could see was that the 30-years started over. We're now 7 years into this mortgage and got another letter from our lender that we can refi from 5.875% down to 5.375%, saving us over $200/mo. We also plan on moving out within a year or two so I figure the increased interest wouldn't be a big deal. So am I missing anything on this?

No closing costs. No application fees or appraisal costs. Last time all I had to do was find a notary public.

yeah do it for sure. It sounds like they're offering to lower your interest rate and reset it to 30, that's a great deal since you can always pay more if you wish.

I just don't get why they'd offer that. Not smart business wise, be cautious of traps or gotchas.

 

[rh71]

* letter was received this week and it quoted 5.375% from 9/18 and that the rate changes daily so that's not set in stone.

So you guys have a point in that the cost is built into a slightly higher rate than the going rate, but I don't really see that coming from 5.875% and spending $0 anyway... correct?

 

[CPA]

Uh, yeah, you just increased your mortgage another 7 years for a half a percent. Without calculating it, I'll bet you come out worse over the long haul.

Edit: I've calculated this assumption:

Assuming:

Mortgage: $250K
Rate: 5.875%
Principal Paid after 7 years: $26,500
Interest Paid after 7 years: $97,800
Total payments if held for 30 years: $532,000

Now, you want to refi after year 7 in a new 30 year mortgage:
New Principal $223,500
Rate: 5.375%
Principal paid after new 30 years: $223,500
Interest paid after new 30 years: $227,000
Principal paid from previous 30 year note: $26,500
Interest from previous 30 year note: $$97,800
Total Paid: $574,800

Over the life of the loan(s), you will end up paying more, even though you paid "less" per month. If you're going to refi, do it in a 15 year note.

 

[CPA]

Originally posted by: Jadow

Originally posted by: rh71
We refi'd for "no cost" once before soon after our initial mortgage. The only downside I could see was that the 30-years started over. We're now 7 years into this mortgage and got another letter from our lender that we can refi from 5.875% down to 5.375%, saving us over $200/mo. We also plan on moving out within a year or two so I figure the increased interest wouldn't be a big deal. So am I missing anything on this?

No closing costs. No application fees or appraisal costs. Last time all I had to do was find a notary public.

yeah do it for sure. It sounds like they're offering to lower your interest rate and reset it to 30, that's a great deal since you can always pay more if you wish.

I just don't get why they'd offer that. Not smart business wise, be cautious of traps or gotchas.

This rarely happens. Most people say they will do it, the vast, vast majority do not. Things come up, emergencies happen, spending happens and before you know it that $200 extra disappears.

It's not worth the risk.

 

[CPA]

Originally posted by: rh71
* letter was received this week and it quoted 5.375% from 9/18 and that the rate changes daily so that's not set in stone.

So you guys have a point in that the cost is built into a slightly higher rate than the going rate, but I don't really see that coming from 5.875% and spending $0 anyway... correct?

Just caught the moving part. Can you say with 95-100% assurity that you will be moving in a couple of years?

I thought Houston would be temporary (1-2 years max). I've been here 15 years with no immediate intentions of moving.

 

[JEDI]

Originally posted by: CPA
Uh, yeah, you just increased your mortgage another 7 years for a half a percent. Without calculating it, I'll bet you come out worse over the long haul.

Edit: I've calculated this assumption:

Assuming:

Mortgage: $250K
Rate: 5.875%
Principal Paid after 7 years: $26,500
Interest Paid after 7 years: $97,800
Total payments if held for 30 years: $532,000

Now, you want to refi after year 7 in a new 30 year mortgage:
New Principal $223,500
Rate: 5.375%
Principal paid after new 30 years: $223,500
Interest paid after new 30 years: $227,000
Principal paid from previous 30 year note: $26,500
Interest from previous 30 year note: $$97,800
Total Paid: $574,800

Over the life of the loan(s), you will end up paying more, even though you paid "less" per month. If you're going to refi, do it in a 15 year note.

but it's worth it if you get a 23yr note at the 5.375% w/zero cost.
just pay a little more over the new note's minimum.

or just pay the same old amount under the new loan. pay off your house faster

 

[CPA]

Originally posted by: JEDI

Originally posted by: CPA
Uh, yeah, you just increased your mortgage another 7 years for a half a percent. Without calculating it, I'll bet you come out worse over the long haul.

Edit: I've calculated this assumption:

Assuming:

Mortgage: $250K
Rate: 5.875%
Principal Paid after 7 years: $26,500
Interest Paid after 7 years: $97,800
Total payments if held for 30 years: $532,000

Now, you want to refi after year 7 in a new 30 year mortgage:
New Principal $223,500
Rate: 5.375%
Principal paid after new 30 years: $223,500
Interest paid after new 30 years: $227,000
Principal paid from previous 30 year note: $26,500
Interest from previous 30 year note: $$97,800
Total Paid: $574,800

Over the life of the loan(s), you will end up paying more, even though you paid "less" per month. If you're going to refi, do it in a 15 year note.

but it's worth it if you get a 23yr note at the 5.375% w/zero cost.
just pay a little more over the new note's minimum.

or just pay the same old amount under the new loan. pay off your house faster

Sure, but he's not getting a 23-year note and as I said most people don't use the monthly savings to plug back into their mortgage.

 

[Jinny]

i've been offered the same rate, no closing costs, just cost of appraisal.
this is from my current lender wells fargo.
however i'm only 1 year into my mortgage.

 

[spidey07]

If OP truly thinks he'll have a sale at a cost he wants 1-2 years from now then it's not a bad idea. As stated things change.

The big downside to refinancing is it resets your ammortization schedule so even though you think you're saving money, you're actually spending and paying more.

Why do you think the banks call you and try to get you to refinance? Because it makes them more money when you do.

 

[CPA]

Originally posted by: Jinny
i've been offered the same rate, no closing costs, just cost of appraisal.
this is from my current lender wells fargo.
however i'm only 1 year into my mortgage.

Actually, you are in a better position than the OP, if you both held your homes for 30 years.

 

[rh71]

^ also Wells Fargo here Jinny... no cost of appraisal for us... you should ask them.

As for definitely moving in 1-2 years, that's contingent on still having our jobs. Otherwise, yes we need to - we have no room for kids here and we need to upgrade school districts for sure.

 

[rbV5]

Originally posted by: rh71
^ also Wells Fargo here Jinny... no cost of appraisal for us... you should ask them.

As for definitely moving in 1-2 years, that's contingent on still having our jobs. Otherwise, yes we need to - we have no room for kids here and we need to upgrade school districts for sure.

Yea, we didn't pay for our appraisal through Wells Fargo either (we just did a similar deal on our refi)

I figure it was pretty much a no-brainer, you can shorten that loan back to 23 easy by paying extra principal, or even refi again if the rates drop low enough. Wells is making it easy for these "close at home" refi's, probably to retain current customers since they generally don't sell their loans.

We used our insurance agent for a notary since he is free...also found out State Farm Insurance is now a Bank and offers Morgtages while he was doing our notary work, HELOC's ect...

 

[TwiceOver]

Hrm, might have to see what WF can do with my loan. Though it is already at 5.25, I don't think they can really go any lower with my current mortgage value.