Profile picture for faladeeze77

SHOULD I REFINANCE?

I currently have 7 years left on a 15-yr fixed mortgage at 4.88% APR. My bank is offering a No Closing Costs streamline refi rate of 4.00 APR (fixed) for a 10-year term. TThey claim we will not have to pay ANY closing costs, they will absorb all those.  However, when I asked them to furnish the new monthly principal charge should we go ahead, they replied that they "cannot adjust all that information until the end when we have your closing date and all your payments in the final payoff". I'm wondering if this means they intend to roll costs into the new principal but don't want to tell us that until they get us to confirm a closing date.  So, is this a good deal or not, esp considering that we're talking about LESS than one percent point reduction in the APR?
  • June 03 2011 - New York
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Answers (13)

If they can not give you a worksheet upfront, then stop talking to them. What is your loan balance? You can probably get 3.25% today or 3.375% with a nice credit to offset closing costs. Are you looking at an FHA loan or conventional?
  • June 03 2011
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If what they are offering is true, then yes it's a pretty good deal.  

Ask them to tell you what your payment would be based upon a loan amount the same as what you owe on your principal balance right now, and then also ask if they can just make that your new loan amount... if they do, keep in mind you will have to bring in some money at closing, but it'd just be the accumulated interest on the old loan & the pre-paid interest on the new loan, it's not actual fees you are paying.
  • June 03 2011
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Profile picture for Chris Corica
No way to know if it is a good deal if they won't provide the numbers you requested. That would be the first sign something is not right. I agree with Clay. Work with someone different.
  • June 03 2011
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faladeeze, your post says you are in NY. If you are, contact Chris who responded to your post, if not in NY, send me an email and I will give you the fees/breakdown.
  • June 03 2011
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At 8 years into your 15F more of your payment is going to principal. Play with the numbers on a Amortization Calculator to see if it makes sense to you to refinance.

Happy funding, Rudi
  • June 03 2011
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Profile picture for faladeeze77
Clay, My current loan balance is appx $75,000 - conventional.
  • June 03 2011
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Who is your mortgage lender?  Are they covering the cost of a CEMA or paying the NYS mortgage tax for you as well?
  • June 03 2011
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You might be confusing the term APR.   APR is used when a loan is originatied, after that point, it doesn't have much relevance.   Do you mean your current loan is 4.88 interest rate?

Is your new proposed loan a 4.00 APR and also 4.00 interest rate?

Bottom line, if you can refinance to a lower interest rate with ALL costs being paid by the lender, it is a good transaction for you.   If you are concerned about amortization and time required to payoff, you could plan to make payments to your new loan equal to the amount you pay now and then the new loan would be paid off sooner than the current since the rate is lower.
  • June 03 2011
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Is your current payment about $1043? If so, you have 84 payments left so that is $87,612. A no closing cost loan at 4% / 10 Year would have a payment of $759.33 x 120 payments = $91,120 paying out $3508 more.   
  • June 03 2011
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You can just make a 7-year payment, you aren't forced to make a 10-year payment on a 10-year loan... that is just the minimum required payment.
  • June 03 2011
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Yes, you could keep paying the same payment as you have now on a new 10 Year loan and pay it off in  7 years but it will only save about $1000 net. Most underwriters will not call that a net benefit except to the originator.
  • June 03 2011
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I agree on that total cost net benefit comment Clay, but at no cost the "break even" point is 0 months and from the net benefit worksheets I've reviewed (granted I haven't seen if NY has a specific one) that would pass underwriting muster.  While a no cost refinance in this situation doesn't offer spectacular benefit, it's still money.  On that loan amount, and if it's a big name bank, the loan officer isn't making much.  For that low of amount of savings though, as a borrower I'd certainly want it to be a streamline/no documentation type loan - with the existing bank, no appraisal, no closing costs... I'd imagine it'd be about 1.5-2 weeks tops (perhaps longer in NY as I've never done a "same bank" refi for anyone there).
  • June 03 2011
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If you only have 7 years left, and are comfortable with your current payment, consider a 5 year ARM. Normally I don't ever recommend ARMs, but if you can get enough lower rate, AND keep making the same payment as you are currently, you would owe very little by the time the loan was able to adjust. 
  • June 03 2011
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