Wondering from those who have refinaced their loans lately what kind of “hidden” costs were involved and how involved the process was.
I’ve got 12 years left on a 20 year fixed and ran the numbers with a quoted rate (a point lower than what I have) to find my payment would go up an extra $100/month, it’ll can cut off two years and in the long run save $12K in interest.
The bank advertises it as a “no closing cost” re-fi but there always seems to be some extra cost involved.
For instance I haven’t had an appraisal since 2002. Will they make me get a new one? Do I have to pay for it? Will there be some types of ‘state’ fees for a new title? Every bit will whittle away at that $12K.
And while all they ask for is a home insurance statement and two pay stubs now is it going to quickly turn into a grocery list of documents they want?
My other option is to just add an extra $100/month now in which I’d cut off about a year and a half and save about $4K in interest.
I don’t know, but assuming you are deducting the interest on your income taxes, that’s another negative - the 8K in savings between $12K in refinancing and $4K paying extra on the current loan isn’t really 8K.
Then again, it might be close to 8K. I don’t know how much your deduction exceeds the standard deduction.
When I did a refi, my most recent appraisal was just over a year old and they required a new one - so that was $400 out of pocket. I’d ask the mortgage company exactly what “no closing costs” means. The difference between “costs” and “fees” can bite you in the butt.
Personally, if I was in your situation, I’d just add the $100/month and be done with it - less aggravation, and if for some reason the $100 is needed one month, it’s there. Not that I’m any kind of financial whiz…
Yes. They’ll make you get an appraisal. That’s going to be around $300. They’ll also make sure you get a title check and possibly title insurance. Not sure what that’ll run you. Neither of those are closing costs but they’ll cost you just the same. There may be additional fees on top of all that. Basically, ask for a good faith estimate in writing to start the process off so you know what you’re dealing with.
But quite honestly, it sounds as if you don’t need a refinance. Have you done the calculations to figure out what you’d save by just adding an additional $100 onto your payment every month? Since you’re willing to do that anyway, why go through the hassle and paperwork of a refi?
And don’t forget - if it’s an FHA loan, you may have to pay for lots of small repairs, like any peeling paint, loose doorhandles, etc., before they will approve the loan.
Plus, since FHA loans require points, you may be paying those points over the first five years of the loan. We dropped our recent re-fi after finding out we would be paying $140/month over the first five years for a 4% rate through FHA. It would have been a “savings” of $176 per month, but we would have also had to make about $1500 in small repairs.
We did not take the loan, particularly after we did the calculation on the extra payments we could have made on our own.
ETA - This was a “no closing cost loan” which also required us to pay $395 for an appraisal. Better than the local banks, I suppose, which charge anywhere from $2000-3000 in fees to re-fi, but still a rip off.
Go into the bank and have a loan officer work you up an estimate. I seem to think that I had about $2k in added fees and costs on my loan last summer. An estimate won’t cost you anything.
What they might be advertising is a “no cost loan”, not a “no closing cost” loan. By “no cost”, they mean no cost to you, out of pocket. What they do is take all of the charges, points, and fees, and ADD THEM in to the loan amount. So if you owe $100,000 now, their closing costs might be $2000, so they’d write the loan for $102,000. This generally isn’t a good deal for you because you’ll be paying interest on all of these charges for the life of the loan.
What do you intend to do with the house, however? Do you intend to stay in it forever, or do you plan to move in 5 years? This will affect your decision. If you intend to stay in it forever, you might be better off keeping the present loan and adding an extra $100 to principal each month, as others have suggested. If you’re going to move in 5 years, it may make more sense to refi at the lowest rate 30 yr. loan you can get. This minimizes out of pocket money now.