ephu437 wrote: ↑Fri Aug 14, 2020 12:32 pm
My wife and I just decided to refinance, to take advantage of low rates. Of course, my first step is to check in at the Bogleheads forum to get the lay of the land and advice that fits my approach to finances and investing. This thread, unfortunately, is rather overwhelming. I expect that it contains all the answers I might seek, but I've no idea how to find them.
Our current mortgage is for about $280k (home value $435k), 4%, 30yr (21 yr remaining), with P+I $1630/month. Our goal is to save money by taking advantage of the low interest rates. We will probably be in the house for a while, and can afford to increase our monthly payments.
My questions cluster around two issues: First, when is it a good idea to buy points, and how many? Second, how to find or shop for the best rates?
The general consensus on this thread is to never buy points. In today's interest rate environment (despite an uptick this week due to a new fee being added), you will likely be able to come down significantly from your 4% rate. You don't mention your state of residence and not all lenders are licensed in every state, but the names on this thread that you want to reach out to are: Better.com, Owning.com (CA only I believe), Loan Depot, Lenderfi, Watermark, Loan Cabin.
If I'm you, I reach out to all and get pricing for a 15-year or 20-year and tell them you want it on a no cost basis. Basically that means you take a little higher than market rate, but get a lender credit to cover the typical loan costs. Think of it like negative points. You want a credit that covers all the costs in Sections A, B, C and E of the official loan estimate each lender provides.
You will need to fill out a formal application and likely OK a hard credit pull for each lender to give you the loan estimate. But each hard credit pull won't incrementally impact your credit score. Once the first pull is made, you have a 2-3 week grace period and can have additional pulls from other lenders that won't harm your score. The credit agencies do this so that you can shop around. Once you have a couple of loan estimates, you can play those off each lender to get them to compete.
My guess is in the current rate environment, you should be able to get 3% or lower on a no cost basis for a 15 or 20 year loan. I would have said 2.5% or lower, but things changed a little this week. Regardless, you will be better off than your current 4% loan and it won't cost you a dime to do it. Good luck!