#1  
Old 10-09-2019, 05:16 PM
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Should I re-finance?


My lender is offering a re-finance. The cost to me is $9,900, and due to a reduction in interest rate I will save $183 per month. The re-fi cost is, of course, rolled into the mortgage amount owed, and the clock will be re-set to 30 years; the current mortgage has about 27 years to go. (I am not interested in shortening my mortgage length by paying more per month, that would just be reducing the amount of money I have available to spend now for someone else's benefit after I'm dead.)

I don't need to save this $183 per month, in fact I doubt I will notice it. I am POd at my lender for pestering me on the phone about this (which I have told them) and for insisting that it was done for my own best interests; and I am somewhat reluctant to reward the pesterer by whatever amount his commission on the $9,900 is. But if it's a good deal and something I ought to do to be financially responsible, I will waive that consideration. I'm just not sure how to make the financial calculations to see if this is worth it.

I have an excellent credit score, by the way, and any damage to it by the lender's inquiry has already been done.
  #2  
Old 10-09-2019, 05:36 PM
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Just from looking at the numbers you gave (3 years into it, and the interest rates then compared to today) it appears like they may be just throwing you enough of a bone so you don't refinance with another. However if I understand you it may be a bone with some meat on it. Just because they are making this offer it does hint that a better deal may be possible and also that better deal may be the fair value offer if you care to look.

In other words you may be able to do better if you cared to do so. You would also be giving up some equity to them in this deal ($9900).
  #3  
Old 10-09-2019, 05:46 PM
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Thanks, I hadn't considered that aspect of things. One thing I forgot to mention is that there is no need for a re-appraisal with this re-fi offer from my current lender. I would expect a new lender to want to have an appraisal, as well as making another query on my credit score.

eta: I am pretty much content with status quo, but who doesn't want to save money, if it's a real savings? Is there a calculator I could use to tell me how long it will take at the $183/month savings to make up that $9,900, with interest?

Last edited by Roderick Femm; 10-09-2019 at 05:47 PM.
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Old 10-09-2019, 05:51 PM
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Such a small savings could easily be due to them extending the term of your loan back out to 30 years. I just refinanced to 3 percent on a 15 year mortgage with only about 2k in closing costs, if that helps any. I'd say shop around, cuz it sounds like they are not offering you a good deal.
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Old 10-09-2019, 05:57 PM
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Quote:
Originally Posted by Roderick Femm View Post
Is there a calculator I could use to tell me how long it will take at the $183/month savings to make up that $9,900, with interest?
https://www.nerdwallet.com/mortgages...inance-savings
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Old 10-09-2019, 06:09 PM
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Quote:
Originally Posted by Roderick Femm View Post
One thing I forgot to mention is that there is no need for a re-appraisal with this re-fi offer from my current lender. I would expect a new lender to want to have an appraisal, as well as making another query on my credit score.
You probably wouldn't need an appraisal with another lender. They aren't reusing your old appraisal (3 years is way too old). Most likely you are in Freddie Mac or Fannie Mae's database and they'll accept your value as given. Any other lender that wants to sell to Freddie/Fannie can do the same.

You're going to get a new hard pull on your credit report whether you go with your old lender or a new one.
  #7  
Old 10-09-2019, 06:16 PM
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This is not a scientific, I crunched the numbers sort of answer. Itís just my first thought based on what you describe.

I would tell the lender to stop bothering me with a deal that has very little upside to me. The costs involved are nothing to sneeze at, and the savings are probably mostly based on converting your original 30 year loan to a 33 year loan (in essence).

Just IMHO.
  #8  
Old 10-09-2019, 06:35 PM
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So, you would be mortgaging their commission and fees to pay over 30 years. Why would you do such a thing? (I know, I know, it's standard practice. But it's like I tell my kids about running up a credit card balance, how does it feel to be paying for that meal or pair of shoes for the next 10 years?)
  #9  
Old 10-09-2019, 07:09 PM
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Yeah, we're refinancing to a 15 year at 3.125% with ~$1200 in upfront costs, including appraisal. We've just closed on the sale of the old house, and will be putting the proceeds into a significantly smaller mortgage.

Those numbers do seem wonky to me. Those closing costs are massive! And the lower monthly payment could very well be driven by the extended time period, as others said. Is that $9900 just the transactional costs (e.g. title fees, originator fees, etc.) or does it include the prepaids (funding the property tax / insurance escrow) that you'd have to pay for anyway?

I'd certainly shop around to see what you could get elsewhere. It'll be relatively straightforward to get some detailed quotes from other lenders (just pick a few that look good from bankrate.com or something).

I wouldn't "expect" an appraisal to be required elsewhere. It may be, but it isn't unusual for it to be waived, especially if your mortgage to home value is very low. And even if it isn't, it's something in the vicinity of $750 (at least here), so if the other lender offers significantly less crazy closing costs ($9900? OMG!) it may still be better.

You can also play with the numbers too. In my experience with the two lenders we looked at this time around we had the option to turn the dials on the interest rates such that slightly increasing or decreasing the rate decreased or increased the upfront costs (through a lender credit). We picked a slightly higher rate with lower upfront costs because we expect to pay down the loan quicker than the schedule. That makes sense for us because we're *not* rolling the closing costs into the mortgage (in fact we're bringing a significant amount of cash to the table to get our debt level down to a comfortable level), but it might make sense to you too depending on how this rolled in $9900 changes your payments.
  #10  
Old 10-10-2019, 08:45 AM
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It will take you over 4 years to make back the closing costs. And that's assuming you're not doing anything else with the money, etc.

It is a shocking cost for a re-fi. I think the sales creep suspects you are a good mark since you didn't come back with an outright rejection due to the amazing number given.

If you are at all interested in re-financing, look elsewhere.
  #11  
Old 10-10-2019, 08:55 AM
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That is a massive number to quote on refi.
There will be cheaper options out there to do the exact same thing, or even better. From your op, though, a more interesting question may be: how long do you expect to live, and do you care what you leave behind? Money now in exchange for debt later is a perfectly fine rationale if you aren’t around when the debt is due, and don’t care much about those that are.
  #12  
Old 10-10-2019, 10:33 AM
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Quote:
Originally Posted by Driver8 View Post

Those numbers do seem wonky to me. Those closing costs are massive! And the lower monthly payment could very well be driven by the extended time period, as others said. Is that $9900 just the transactional costs (e.g. title fees, originator fees, etc.) or does it include the prepaids (funding the property tax / insurance escrow) that you'd have to pay for anyway?
Yeah, I would ask for a breakdown of the fees and if they can't get that to you upfront, run as far as your can. Because nearly 10K on a no-appraisal refi makes no sense to me.
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Old 10-10-2019, 10:47 AM
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Another vote for the fees seem way too high. I would shop around, or if that's too much trouble just tell them no thanks.

Last edited by control-z; 10-10-2019 at 10:49 AM.
  #14  
Old 10-10-2019, 11:16 AM
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Thanks for the perspective on the re-fi fee, everyone.
Quote:
Originally Posted by Driver8 View Post
Those numbers do seem wonky to me. Those closing costs are massive! And the lower monthly payment could very well be driven by the extended time period, as others said. Is that $9900 just the transactional costs (e.g. title fees, originator fees, etc.) or does it include the prepaids (funding the property tax / insurance escrow) that you'd have to pay for anyway?
The fee is separate from the property tax/insurance escrow, which is already in place.

There doesn't seem to be any doubt that I should turn this down.
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