Refinance?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
ihatedebt1987
Posts: 2
Joined: Wed Jun 12, 2019 3:21 pm

Refinance?

Post by ihatedebt1987 » Wed Jun 12, 2019 3:35 pm

My wife and I are coming up on the 1 year mark of a 30 year fixed mortgage at 4.75% with a balance of 428k remaining. We're also paying close to $69/month in PMI :( . Our lender called me out of the blue last week saying they could give us a cost free refinance to 4%. Nothing brought to closing, and nothing rolled into the mortgage. The only thing I would have to pay for is the appraisal and application fees, which they would end up crediting back to us at closing. I would also have to bring money to the table to fund the new escrow account which would then be credited back as well from our current escrow account. I feel like this is too good to be true, but the more questions I ask, the more it seems legit. It truly feels like they are just trying to keep our business, instead of having us leave to go somewhere else.

I have two questions:
  • Is this a no-brainer, and should we take the refinance offer?
  • Anything anyone can think of that we should ask our lender or look out for, that could potentially come back and bite us later?
Thank you for any input and advice!

User avatar
Meg77
Posts: 2505
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: Refinance?

Post by Meg77 » Wed Jun 12, 2019 4:25 pm

Banker here. It's very likely legit; the closing credits you're talking about are a thing, even though I know it sounds hokey to charge something then credit it back. Banks often target their own clients like this to avoid losing them to competitors when they know they could get a better deal.

I'd take the deal. Just make sure you get rid of PMI while you are at it by paying the loan down if necessary (even if you have to borrow elsewhere to pay the loan down to do it). It's not worth refinancing again later to do that, and you don't want to be stuck with PMI for however many more years it would last. You could consider a 15 or 20 year amort too to shave the rate down even more if you can afford it. DH and I ended up refinancing 3 times in about 3 years after we bought our house. Once to get rid of pmi and slightly lower the rate, once to really lower the rate, and then again to get into a 15 year amort (further slashing the rate) since our income had risen and we were paying extra on it monthly anyway.
"An investment in knowledge pays the best interest." - Benjamin Franklin

Topic Author
ihatedebt1987
Posts: 2
Joined: Wed Jun 12, 2019 3:21 pm

Re: Refinance?

Post by ihatedebt1987 » Wed Jun 12, 2019 6:55 pm

Meg77 wrote:
Wed Jun 12, 2019 4:25 pm
Banker here. It's very likely legit; the closing credits you're talking about are a thing, even though I know it sounds hokey to charge something then credit it back. Banks often target their own clients like this to avoid losing them to competitors when they know they could get a better deal.

I'd take the deal. Just make sure you get rid of PMI while you are at it by paying the loan down if necessary (even if you have to borrow elsewhere to pay the loan down to do it). It's not worth refinancing again later to do that, and you don't want to be stuck with PMI for however many more years it would last. You could consider a 15 or 20 year amort too to shave the rate down even more if you can afford it. DH and I ended up refinancing 3 times in about 3 years after we bought our house. Once to get rid of pmi and slightly lower the rate, once to really lower the rate, and then again to get into a 15 year amort (further slashing the rate) since our income had risen and we were paying extra on it monthly anyway.
Thank you for the advice. It's much appreciated!

Post Reply