Refinance Mega Thread
Re: Refinance Mega Thread
I have a question for the group here. I did two refinances last year to move from a 30Y 4% to a 15Y 2.875%, and then from a 15Y 2.875% to a 15Y 2.25%. Thankfully, both of these were done with net credits to me against Sections A, B, C, E of the loan estimate, so I am not in a breakeven period. Loan amount is ~$265K.
I thought I was pretty much done with refinances for the time being, but looking at the current rates being offered, I decided to take another look, and am looking at a couple of options for 15Y 1.75% and 1.875% rates, which are accompanied by relatively high discount points that need to be paid. If I were to go through with either of these options, the breakeven times would be 4-4.5 years.
I will add a note here to say that I am not planning to move or sell this property in the next 5 years.
Trying to figure out if it's even worth thinking about these options at these terms, especially if moving from a 2.25% to 1.875% or 1.75%. Here are the pros and cons I am considering.
Pros
- Lower interest rate and monthly savings on Principal + Interest payment (obvious one)
Cons
- Due to the breakeven period that I would now subject myself to, essentially I am betting that interest rates will not go lower than 1.75% in the near future, and I would need to stick with that rate for at least the next 4 years to make sure I don't lose the effect of the interest savings. So, if rates dip below 1.75% or the new 0-point rate is 1.75%, bad luck for me
Any other pros/cons I should be thinking about? Is this even worth consideration?
Thank You!
I thought I was pretty much done with refinances for the time being, but looking at the current rates being offered, I decided to take another look, and am looking at a couple of options for 15Y 1.75% and 1.875% rates, which are accompanied by relatively high discount points that need to be paid. If I were to go through with either of these options, the breakeven times would be 4-4.5 years.
I will add a note here to say that I am not planning to move or sell this property in the next 5 years.
Trying to figure out if it's even worth thinking about these options at these terms, especially if moving from a 2.25% to 1.875% or 1.75%. Here are the pros and cons I am considering.
Pros
- Lower interest rate and monthly savings on Principal + Interest payment (obvious one)
Cons
- Due to the breakeven period that I would now subject myself to, essentially I am betting that interest rates will not go lower than 1.75% in the near future, and I would need to stick with that rate for at least the next 4 years to make sure I don't lose the effect of the interest savings. So, if rates dip below 1.75% or the new 0-point rate is 1.75%, bad luck for me
Any other pros/cons I should be thinking about? Is this even worth consideration?
Thank You!
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Re: Refinance Mega Thread
Sorry you are not on the lake.flyonnylon wrote: ↑Fri May 28, 2021 6:56 amHey, I paid $6k in points. Little bummed about the upfront costs but am not moving for at least 6 years and should save $450/mo with the better interest rate. Mortgage is about 7% of gross monthly income so could have done 15-year however the whole point of my refi is being able to invest the monthly savings, since I'm optimistic about the market and would like to FIRE in about 6 years. Would rather invest the savings than pay extra towards principal plus historically 2.375 is a pretty good rate for even a 15 yr..jason1122 wrote: ↑Thu May 20, 2021 9:16 amCan I ask how much you're paying to get 2.375?flyonnylon wrote: ↑Wed May 19, 2021 9:59 pm Was working with BoA for a 30 yr fixed refi at 2.875 but they were a bit of hassle so checked out Better and today locked in 2.375 30 yr fixed.
Talking to my parents who have rental properties; my mortgage on a 4k sq/ft house on 1 acre, walking distance to the lake, 20min from downtown in a nice school district is the same price they rent a 1300 sq/ft rental on 1/8 acre in a less desirable area.. it's a nice time to be a homeowner.
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Re: Refinance Mega Thread
Personally, I wouldn’t choose that. Over the term, how much are you saving in interest (be sure to deduct your A-E costs from that number too)? You will likely find the raw dollar amount is small.kmanjir wrote: ↑Fri May 28, 2021 9:08 am I have a question for the group here. I did two refinances last year to move from a 30Y 4% to a 15Y 2.875%, and then from a 15Y 2.875% to a 15Y 2.25%. Thankfully, both of these were done with net credits to me against Sections A, B, C, E of the loan estimate, so I am not in a breakeven period. Loan amount is ~$265K.
I thought I was pretty much done with refinances for the time being, but looking at the current rates being offered, I decided to take another look, and am looking at a couple of options for 15Y 1.75% and 1.875% rates, which are accompanied by relatively high discount points that need to be paid. If I were to go through with either of these options, the breakeven times would be 4-4.5 years.
I will add a note here to say that I am not planning to move or sell this property in the next 5 years.
Trying to figure out if it's even worth thinking about these options at these terms, especially if moving from a 2.25% to 1.875% or 1.75%. Here are the pros and cons I am considering.
What are your options for 2%? I am doing a cash out with credits to cover A-E at a lower loan amount as you for 2.375%. Without a cash out, you should be lower than I am for a no-cost, if our borrower profiles and markets are similar.
Re: Refinance Mega Thread
Thanks a lot for the gut-check, Brandonbogle. I am uncomfortable as well locking myself into such a long breakeven time period.BrandonBogle wrote: ↑Fri May 28, 2021 10:59 amPersonally, I wouldn’t choose that. Over the term, how much are you saving in interest (be sure to deduct your A-E costs from that number too)? You will likely find the raw dollar amount is small.kmanjir wrote: ↑Fri May 28, 2021 9:08 am I have a question for the group here. I did two refinances last year to move from a 30Y 4% to a 15Y 2.875%, and then from a 15Y 2.875% to a 15Y 2.25%. Thankfully, both of these were done with net credits to me against Sections A, B, C, E of the loan estimate, so I am not in a breakeven period. Loan amount is ~$265K.
I thought I was pretty much done with refinances for the time being, but looking at the current rates being offered, I decided to take another look, and am looking at a couple of options for 15Y 1.75% and 1.875% rates, which are accompanied by relatively high discount points that need to be paid. If I were to go through with either of these options, the breakeven times would be 4-4.5 years.
I will add a note here to say that I am not planning to move or sell this property in the next 5 years.
Trying to figure out if it's even worth thinking about these options at these terms, especially if moving from a 2.25% to 1.875% or 1.75%. Here are the pros and cons I am considering.
What are your options for 2%? I am doing a cash out with credits to cover A-E at a lower loan amount as you for 2.375%. Without a cash out, you should be lower than I am for a no-cost, if our borrower profiles and markets are similar.
For the 2%, the best I am seeing so far is a breakeven of ~13 months, so just over a year (that is, with A-E taken into account). My ideal breakeven time (if any) would be 5-6 months. Waiting on a few other estimates to come in to see if I can shave some more months off.
To your other question, yes, the raw dollar amount of savings has now gone down. I had a lot of savings going from the 4 to 2.875, and then to the 2.25. If the upfront costs are factored in, even lower amount of savings.
One other question: I typically pay extra towards principal every month on top of the regular payments. Main reason being to pay less interest in the long run. But are there any (counter-intuitive) disadvantages to doing so when going into a breakeven period with a new rate?
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Re: Refinance Mega Thread
Well, once you’ve done the refi, A-E are sunk costs and I wouldn’t dwell on a past decision to decide on a future one.kmanjir wrote: ↑Fri May 28, 2021 4:36 pm One other question: I typically pay extra towards principal every month on top of the regular payments. Main reason being to pay less interest in the long run. But are there any (counter-intuitive) disadvantages to doing so when going into a breakeven period with a new rate?
Many people take a shorthand and compare two rates at full term and divide the closing costs difference with the payment difference. That is a handy shortcut, but it isn’t quite the right calc. You should compare the cumulative interest paid between the two loans month-by-month, and then see when the difference between them exceeds your closing cost difference. Doing it that way (with a handy spreadsheet hopefully), you can include the monthly extra in the calcs.
But be sure to compare apples-to-apples. Let’s say at 2% the payment is $1,000/mo and at 2.125% it is $1,250/mo. Then let’s say you will pay $500 extra at 2.125%. Then calc using $750 extra at 2% so your total P&I payment is the same between the two.
Re: Refinance Mega Thread
Thanks, yes, I still have that handy spreadsheet you had shared last year, to compare the costs of loans including factoring in additional payments. And, that makes sense to keep the P&I payment the same - in fact, that is how I have been adjusting my payment in reality as well, so I have been paying the same all along through these refinances, just increasing the proportion of my principal paid.BrandonBogle wrote: ↑Fri May 28, 2021 6:37 pmWell, once you’ve done the refi, A-E are sunk costs and I wouldn’t dwell on a past decision to decide on a future one.kmanjir wrote: ↑Fri May 28, 2021 4:36 pm One other question: I typically pay extra towards principal every month on top of the regular payments. Main reason being to pay less interest in the long run. But are there any (counter-intuitive) disadvantages to doing so when going into a breakeven period with a new rate?
Many people take a shorthand and compare two rates at full term and divide the closing costs difference with the payment difference. That is a handy shortcut, but it isn’t quite the right calc. You should compare the cumulative interest paid between the two loans month-by-month, and then see when the difference between them exceeds your closing cost difference. Doing it that way (with a handy spreadsheet hopefully), you can include the monthly extra in the calcs.
But be sure to compare apples-to-apples. Let’s say at 2% the payment is $1,000/mo and at 2.125% it is $1,250/mo. Then let’s say you will pay $500 extra at 2.125%. Then calc using $750 extra at 2% so your total P&I payment is the same between the two.
After comparing the quotes that I had, I think I am going to go with the 2.125 quote that I have because it has net credits towards the closing costs, and has very similar savings to the current 2% quote when I consider the points and closing costs associated with the 2%.
Thanks, as usual, for walking me through the thought process, I appreciate it!
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Re: Refinance Mega Thread
About to close on purchase of home and awaiting final options from lender as to rate/points. We locked at a cap of 3.25 for 30yr with negligible closing costs on $400k. Semi custom build for which we used a local lender to better coordinate with builder. If rates remain low, we plan to refinance.
Spouse wants to retire shortly after closing on new home and moving in. I prefer a standard income based loan (both incomes) for the refinance. How quickly after we close on the purchase loan, can we safely refinance? I’ve read 6 mos? Would likely go with Better or one of the other online lenders commonly discussed here. Are there any barriers to this? And why are refinance rates generally lower than purchase rates? Basically trying to determine how long spouse will need to continue working. Thanks for feedback.
Spouse wants to retire shortly after closing on new home and moving in. I prefer a standard income based loan (both incomes) for the refinance. How quickly after we close on the purchase loan, can we safely refinance? I’ve read 6 mos? Would likely go with Better or one of the other online lenders commonly discussed here. Are there any barriers to this? And why are refinance rates generally lower than purchase rates? Basically trying to determine how long spouse will need to continue working. Thanks for feedback.
Re: Refinance Mega Thread
Question for the group:
I purchased my home less than a year ago for approx $575K. My current homeowners policy lists dwelling coverage at approx $550K (not taking into account the land). Does this sound reasonable?
Secondary question that ties back into the refi conversation...I'm essentially cleared to close on a refi with Better, but when I did the initial online application I listed the value of my house as $650K (based on Zillow estimate, but I really believe it's appreciated at least that much in the current market, even though I bought it less than a year ago). They waived the assessment. But now I'm wondering/worrying that they'll tell me that my homeowners coverage is not reflective of the $650K assessed (without appraisal) value, and will want me to bump up my policy coverage, which will bump up my policy premium. My intention was to keep the same insurer I have now and the rep there indicated that my policy premium would not change as a result of the refi, but they didn't ask me about any change in assessed home value related to the refi. Or is that not really that important to them anyway? Again, given the current $550K dwelling coverage, it seems like I could be over-covered already, given that the land/location is not accounted for, and I'm in a high-value location (water-view near the shore).
I'm poking at this now as I'm cleared to close but am wavering on going through with the refi, because I'm not sure the juice is worth the squeeze. I was planning on rolling in all costs (including escrows) which will effectively result in a cash-out refi of about $8K (skipped monthly payment + check back from current escrow). This is a 30 year 2.875% -> 2.375% improvement, but at the cost of significant closing costs (approx $8.5K in points, plus escrow, etc.) so an initial bump in my outstanding loan balance (approx $20K) and pushing out my loan by approx a year, all just to walk away with $8K in cash, approx $60/month savings, and the proud feeling of telling people that I've got a 2.375% 30-year rate.
My rationale was to take the cash out and the monthly savings and invest it, and never consider paying the mortgage off early.
Conversely, I've modeled the scenario where I paid that $8K right back at the mortgage on the 1st month, as well as paying the same monthly payment I do now (i.e., approx $60/month more than I'm required) and that results in a break-even point where my outstanding loan balance would be the same whether I did the refi or not right around the 8-year mark, and would result in the loan getting paid off approx 1 year early and with a total savings in interest of approx $25K. And I guess I should be factoring in the extra year of P&I payments that I'd be saving once the loan was paid off, so let's call that $20K.
If I have no intention of selling the house within the next 8 years (that break-even point), then it seems like this is a no-brainer to just go ahead and do it, since there's no up-front cost to me (other than my time, which has already been spent). But again, the savings is so minimal that I'm second-guessing it. Perhaps a better use of this sort of excercise might be to secure a HELOC, the value of which might be greater without the refi's padding of my outstanding balance (assuming whoever get a HELOC with appraises my house at at least $650K).
I've previously posted about this and had a couple of people tell me that I'm paying too much in points for too minimal of an improvement, but I'm pretty sure that this is coming from the folks who are in favor of paying off their mortgage early, which is not my mindset. So I'm interested in hearing if there's anyone out there that thinks going through with this is a good idea, and/or if anyone sees any other things I might be missing/mis-calculating (plus hopefully some answers to my initial questions about the homeowners policy coverage).
I purchased my home less than a year ago for approx $575K. My current homeowners policy lists dwelling coverage at approx $550K (not taking into account the land). Does this sound reasonable?
Secondary question that ties back into the refi conversation...I'm essentially cleared to close on a refi with Better, but when I did the initial online application I listed the value of my house as $650K (based on Zillow estimate, but I really believe it's appreciated at least that much in the current market, even though I bought it less than a year ago). They waived the assessment. But now I'm wondering/worrying that they'll tell me that my homeowners coverage is not reflective of the $650K assessed (without appraisal) value, and will want me to bump up my policy coverage, which will bump up my policy premium. My intention was to keep the same insurer I have now and the rep there indicated that my policy premium would not change as a result of the refi, but they didn't ask me about any change in assessed home value related to the refi. Or is that not really that important to them anyway? Again, given the current $550K dwelling coverage, it seems like I could be over-covered already, given that the land/location is not accounted for, and I'm in a high-value location (water-view near the shore).
I'm poking at this now as I'm cleared to close but am wavering on going through with the refi, because I'm not sure the juice is worth the squeeze. I was planning on rolling in all costs (including escrows) which will effectively result in a cash-out refi of about $8K (skipped monthly payment + check back from current escrow). This is a 30 year 2.875% -> 2.375% improvement, but at the cost of significant closing costs (approx $8.5K in points, plus escrow, etc.) so an initial bump in my outstanding loan balance (approx $20K) and pushing out my loan by approx a year, all just to walk away with $8K in cash, approx $60/month savings, and the proud feeling of telling people that I've got a 2.375% 30-year rate.
My rationale was to take the cash out and the monthly savings and invest it, and never consider paying the mortgage off early.
Conversely, I've modeled the scenario where I paid that $8K right back at the mortgage on the 1st month, as well as paying the same monthly payment I do now (i.e., approx $60/month more than I'm required) and that results in a break-even point where my outstanding loan balance would be the same whether I did the refi or not right around the 8-year mark, and would result in the loan getting paid off approx 1 year early and with a total savings in interest of approx $25K. And I guess I should be factoring in the extra year of P&I payments that I'd be saving once the loan was paid off, so let's call that $20K.
If I have no intention of selling the house within the next 8 years (that break-even point), then it seems like this is a no-brainer to just go ahead and do it, since there's no up-front cost to me (other than my time, which has already been spent). But again, the savings is so minimal that I'm second-guessing it. Perhaps a better use of this sort of excercise might be to secure a HELOC, the value of which might be greater without the refi's padding of my outstanding balance (assuming whoever get a HELOC with appraises my house at at least $650K).
I've previously posted about this and had a couple of people tell me that I'm paying too much in points for too minimal of an improvement, but I'm pretty sure that this is coming from the folks who are in favor of paying off their mortgage early, which is not my mindset. So I'm interested in hearing if there's anyone out there that thinks going through with this is a good idea, and/or if anyone sees any other things I might be missing/mis-calculating (plus hopefully some answers to my initial questions about the homeowners policy coverage).
Re: Refinance Mega Thread
CT-Scott wrote: ↑Sat May 29, 2021 9:19 am
If I have no intention of selling the house within the next 8 years (that break-even point), then it seems like this is a no-brainer to just go ahead and do it, since there's no up-front cost to me (other than my time, which has already been spent). But again, the savings is so minimal that I'm second-guessing it. Perhaps a better use of this sort of excercise might be to secure a HELOC, the value of which might be greater without the refi's padding of my outstanding balance (assuming whoever get a HELOC with appraises my house at at least $650K).
I've previously posted about this and had a couple of people tell me that I'm paying too much in points for too minimal of an improvement, but I'm pretty sure that this is coming from the folks who are in favor of paying off their mortgage early, which is not my mindset. So I'm interested in hearing if there's anyone out there that thinks going through with this is a good idea, and/or if anyone sees any other things I might be missing/mis-calculating (plus hopefully some answers to my initial questions about the homeowners policy coverage).
I'll let the more knowledgeable folks on this thread provide you with detailed guidance especially on your home insurance questions, but wanted to share some insight that I have picked up from this thread:
- In general, it's advisable not to pay a high amount of points to get to a lower rate if the breakeven period is significantly high (for example, 8 years in your case). This is even if you plan to stay in the property for that long and do not plan to sell. The primary reason for this is basically you're betting that interest rates will not go lower (or be available cheaper) than the rate that you paid points for. So, in your case, if you find that 30Y rates are available lower than 2.375% down the road or even the 2.375% rate is available at a cheaper discount over the next 8 years, your hands are tied if you don't want to lose the effect of the interest savings by doing a refi again before you've reached the breakeven point.
(Note: I need occasional reminders on this guidance as well, as you may see from my last couple of posts. )
- I noticed you mentioned the rate is from Better. Have you rate-shopped at other places as well? Better is known for providing not-so-good offers if you don't have a competing offer to pit them against. Typically, a lot of folks here will get offers from places like LenderFi, Loan Cabin, other local banks and credit unions to get Better to match/improve on those offers. Might help you get the number of points down.
Also, here's a mortgage comparison spreadsheet that BrandonBogle shared a while back that I have used extensively. It probably has the most flexible set of inputs one could want when comparing multiple loan offers and terms.
https://www.vertex42.com/Calculators/ho ... lator.html
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Re: Refinance Mega Thread
This isn't so much a question about who you refinance with, but the terms of the loan you take from the builder's preferred lender. Sometimes these lenders include serious consequence clauses. For instance, let's say the builder said "we will upgrade you to granite countertops at no charge if you use our preferred lender". If you look through the paperwork, that may have been a charge from the builder that the lender provided a credit for. Then there might be language that the lender would claw back the credits if refinanced within a certain period of time.Astronaut4 wrote: ↑Sat May 29, 2021 6:31 am About to close on purchase of home and awaiting final options from lender as to rate/points. We locked at a cap of 3.25 for 30yr with negligible closing costs on $400k. Semi custom build for which we used a local lender to better coordinate with builder. If rates remain low, we plan to refinance.
Spouse wants to retire shortly after closing on new home and moving in. I prefer a standard income based loan (both incomes) for the refinance. How quickly after we close on the purchase loan, can we safely refinance? I’ve read 6 mos? Would likely go with Better or one of the other online lenders commonly discussed here. Are there any barriers to this? And why are refinance rates generally lower than purchase rates? Basically trying to determine how long spouse will need to continue working. Thanks for feedback.
You may not have any such provision on the loan you get, but I would through the docs thoroughly for any type of claw back provision. That would be the one that really determines how fast you can refi without a penalty.
You may also encounter a few entities (notably LenderFi) that will outright refuse to work with you if want to refi in under 6 months. From their POV, you can't be "trusted" to stay with them the minimum 6 months for them to not repay the profits from your loan, so they don't even refi with you to begin with.
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Re: Refinance Mega Thread
CT-Scott wrote: ↑Sat May 29, 2021 9:19 am Question for the group:
I purchased my home less than a year ago for approx $575K.
...
I'm poking at this now as I'm cleared to close but am wavering on going through with the refi, because I'm not sure the juice is worth the squeeze. I was planning on rolling in all costs (including escrows) which will effectively result in a cash-out refi of about $8K (skipped monthly payment + check back from current escrow). This is a 30 year 2.875% -> 2.375% improvement, but at the cost of significant closing costs (approx $8.5K in points, plus escrow, etc.) so an initial bump in my outstanding loan balance (approx $20K) and pushing out my loan by approx a year, all just to walk away with $8K in cash, approx $60/month savings, and the proud feeling of telling people that I've got a 2.375% 30-year rate.
My rationale was to take the cash out and the monthly savings and invest it, and never consider paying the mortgage off early.
Conversely, I've modeled the scenario where I paid that $8K right back at the mortgage on the 1st month, as well as paying the same monthly payment I do now (i.e., approx $60/month more than I'm required) and that results in a break-even point where my outstanding loan balance would be the same whether I did the refi or not right around the 8-year mark,
...
If I have no intention of selling the house within the next 8 years (that break-even point), then it seems like this is a no-brainer to just go ahead and do it, since there's no up-front cost to me (other than my time, which has already been spent).
As for insurance, the figures are never 100%. I believe there is a built-in 125% overage allowance or something to that? My HOI has a unlimited overage rider, so the values listed don't matter at all in my case. Also, keep in mind replacement cost and purchase price are not the same. The HOI is for replacement coverage (plus liability, etc.).kmanjir wrote: ↑Sat May 29, 2021 10:31 am I'll let the more knowledgeable folks on this thread provide you with detailed guidance especially on your home insurance questions, but wanted to share some insight that I have picked up from this thread:
- In general, it's advisable not to pay a high amount of points to get to a lower rate if the breakeven period is significantly high (for example, 8 years in your case). This is even if you plan to stay in the property for that long and do not plan to sell. The primary reason for this is basically you're betting that interest rates will not go lower (or be available cheaper) than the rate that you paid points for. So, in your case, if you find that 30Y rates are available lower than 2.375% down the road or even the 2.375% rate is available at a cheaper discount over the next 8 years, your hands are tied if you don't want to lose the effect of the interest savings by doing a refi again before you've reached the breakeven point.
(Note: I need occasional reminders on this guidance as well, as you may see from my last couple of posts. )
- I noticed you mentioned the rate is from Better. Have you rate-shopped at other places as well? Better is known for providing not-so-good offers if you don't have a competing offer to pit them against. Typically, a lot of folks here will get offers from places like LenderFi, Loan Cabin, other local banks and credit unions to get Better to match/improve on those offers. Might help you get the number of points down.
Also, here's a mortgage comparison spreadsheet that BrandonBogle shared a while back that I have used extensively. It probably has the most flexible set of inputs one could want when comparing multiple loan offers and terms.
https://www.vertex42.com/Calculators/ho ... lator.html
I absolutely would NEVER take a refi that has an 8-year payoff period. The average age of homeownership is 7 years I think. You could end up selling before ever breaking even.
Take note of kmanjir said. 9 times out of 10, Better's initial offers suck. Heck, I just had Better beat their own initial pricing by $6k on my current refi compared to what they themselves advertised on Bankrate! The good news is Better will entertain a competing offer until you sign your closing disclosures. They will also let you change to any rate on your rate table until then too.
Reach out to your loan consultant (the first person in your process) and ask them to send you a screenshot of your rate table (if you do a competing offer, do that first). Then use that spreadsheet kmanjir shared to compare the pricing between each option. Build a comparison between the options like this (I fudged the numbers a bit for privacy). This is from my current refi:
Code: Select all
Rate Points/Credit Total Closing Interest Total Cost
1.875% $4,712 $5,551 $31,231 $37,082
2.000% $3,571 $4,410 $33,824 $38,134
2.125% $2,289 $3,128 $35,980 $39,088
2.250% $1,436 $2,375 $38,548 $40,523
2.375% $21 $860 $40,238 $41,238
2.500% ($878) ($39) $42,608 $42,584
2.625% ($1,992) ($1,153) $44,775 $43,522
2.750% ($3,285) ($2,458) $47,067 $44,694
2.875% ($3,858) ($2,019) $49,632 $46,413
2. Compare each point option to each other. For instance, above it points cost me $1.2k to go from 2% to 1.875%. Compare the interest monthly between the two to see when you save that difference.
#1 is break-even to even refi. #2 is break-even between the options once you've chosen to refi.
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Re: Refinance Mega Thread
Thanks for your feedback. We didn’t use the builders preferred lender, instead used a recommended broker that was local. But as you said, the answer may be in their documentation. I’ll comb thru what I have already and what should be provided before closingBrandonBogle wrote: ↑Sat May 29, 2021 11:42 amThis isn't so much a question about who you refinance with, but the terms of the loan you take from the builder's preferred lender. Sometimes these lenders include serious consequence clauses. For instance, let's say the builder said "we will upgrade you to granite countertops at no charge if you use our preferred lender". If you look through the paperwork, that may have been a charge from the builder that the lender provided a credit for. Then there might be language that the lender would claw back the credits if refinanced within a certain period of time.Astronaut4 wrote: ↑Sat May 29, 2021 6:31 am About to close on purchase of home and awaiting final options from lender as to rate/points. We locked at a cap of 3.25 for 30yr with negligible closing costs on $400k. Semi custom build for which we used a local lender to better coordinate with builder. If rates remain low, we plan to refinance.
Spouse wants to retire shortly after closing on new home and moving in. I prefer a standard income based loan (both incomes) for the refinance. How quickly after we close on the purchase loan, can we safely refinance? I’ve read 6 mos? Would likely go with Better or one of the other online lenders commonly discussed here. Are there any barriers to this? And why are refinance rates generally lower than purchase rates? Basically trying to determine how long spouse will need to continue working. Thanks for feedback.
You may not have any such provision on the loan you get, but I would through the docs thoroughly for any type of claw back provision. That would be the one that really determines how fast you can refi without a penalty.
You may also encounter a few entities (notably LenderFi) that will outright refuse to work with you if want to refi in under 6 months. From their POV, you can't be "trusted" to stay with them the minimum 6 months for them to not repay the profits from your loan, so they don't even refi with you to begin with.
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Re: Refinance Mega Thread
know you're being facetious but I used to want a lake house as primary home, however after spending a large amount of time on the lake over the past 6 years, I'm good with a couple hundred acres of public land between my place and the lake to act as a sound buffer. Living directly on the lake ends up being pretty loud as people night fish around here a lot so you have near 24/7 boat noise. The marina is 5min away and my backyard is pretty quiet in the winter and basically only natural sounds in the summer due to crickets/cicadas etc. The $1mil lakefront lot premium is nice to avoid as well..
Re: Refinance Mega Thread
Hello all - recent first-time refinancer here with a question about payment refunds from old mortgage company. I moved from a Wells Fargo 30-year @ 3.375 to a 15-year @ 2% with LenderFi. When I began the refi process in late March, I had a principal balance of $415k. I made the usual monthly payment on April 1 while in underwriting on the new loan. The new loan carries the March principal balance of $415k although by the time of closing, our WF principal balance was $414k, meaning I effectively made a double payment for April. The notary who came to do our closing stated that we may be owed a refund from WF for our April payment since LenderFi paid WF the $415k balance (roughly $1k principal and $2.2k total). I'd never heard that before but it seems logical since WF received the same payment twice. I've done some searching around but haven't been able to find any information on these types of refunds -- all I can find relates to refund of escrow accounts, which I have already received. My question is, am I owed the amount of the overpayment by WF, or do I chalk it up to the cost of refinancing?
Re: Refinance Mega Thread
Yes, you owed the overpayment. It's very common in refinances and you will be send the refund by WF. For me, it was automatic for both WF and BofA.hoos09 wrote: ↑Tue Jun 01, 2021 7:46 am Hello all - recent first-time refinancer here with a question about payment refunds from old mortgage company. I moved from a Wells Fargo 30-year @ 3.375 to a 15-year @ 2% with LenderFi. When I began the refi process in late March, I had a principal balance of $415k. I made the usual monthly payment on April 1 while in underwriting on the new loan. The new loan carries the March principal balance of $415k although by the time of closing, our WF principal balance was $414k, meaning I effectively made a double payment for April. The notary who came to do our closing stated that we may be owed a refund from WF for our April payment since LenderFi paid WF the $415k balance (roughly $1k principal and $2.2k total). I'd never heard that before but it seems logical since WF received the same payment twice. I've done some searching around but haven't been able to find any information on these types of refunds -- all I can find relates to refund of escrow accounts, which I have already received. My question is, am I owed the amount of the overpayment by WF, or do I chalk it up to the cost of refinancing?
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Re: Refinance Mega Thread
Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
Re: Refinance Mega Thread
That rate seems way too high for a 15 year fixed. What do you get when you use the PNC calculator for your zip code?TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
https://www.pnc.com/en/personal-banking ... src=topnav
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Re: Refinance Mega Thread
Thanks for the tip.mervinj7 wrote: ↑Tue Jun 01, 2021 3:07 pmThat rate seems way too high for a 15 year fixed. What do you get when you use the PNC calculator for your zip code?TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
https://www.pnc.com/en/personal-banking ... src=topnav
PNC is saying they can do 2.375% for 15FRM. I've soft applied and am waiting to hear back. None of the other lenders I contacted (better.com, Wells Fargo, Zillow, bankrate) got below 2.625%--and only one can match, I think.
Re: Refinance Mega Thread
Well, the closing was ready to move forward soon, with just a few tasks left on our end (mostly accepting some things), but after digesting more of the feedback some of you gave me, I decided to email our team at Better.com a "Dear John" letter informing them that we've decided not to move forward, as the break-even period was too long.
Even though we've bought/sold several homes and refinanced at least once before (maybe twice), I feel like I've definitely learned a bit more about it all this time around, so I'll be a bit more prepared if rates get a bit lower. If not, the 2.875% 30-year rate we've currently got is already quite good, historically.
Thanks again for those of you who took the time to reply to my prior posts in this thread.
Even though we've bought/sold several homes and refinanced at least once before (maybe twice), I feel like I've definitely learned a bit more about it all this time around, so I'll be a bit more prepared if rates get a bit lower. If not, the 2.875% 30-year rate we've currently got is already quite good, historically.
Thanks again for those of you who took the time to reply to my prior posts in this thread.
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Re: Refinance Mega Thread
Spoke with PNC: 2.375 is with 1 point, at about $2800 additional. Their no-point rate is 2.625%, just like the others. But if I use their wealth management service, they'll knock another half-percent off. I'm going to chat with the wealth management folks tomorrow. I'm not optimistic I'll be happy with what they offer, but we'll see.TomWambsgans wrote: ↑Tue Jun 01, 2021 3:44 pmThanks for the tip.mervinj7 wrote: ↑Tue Jun 01, 2021 3:07 pmThat rate seems way too high for a 15 year fixed. What do you get when you use the PNC calculator for your zip code?TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
https://www.pnc.com/en/personal-banking ... src=topnav
PNC is saying they can do 2.375% for 15FRM. I've soft applied and am waiting to hear back. None of the other lenders I contacted (better.com, Wells Fargo, Zillow, bankrate) got below 2.625%--and only one can match, I think.
Re: Refinance Mega Thread
Bank of America seems to be competitive on jumbos, at least for purchases. Not sure about refis.TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
I had success finding a loan officer through this link:
https://mortgage.bankofamerica.com/locator/
Try to find someone whose profile links to a lot of 5-star Zillow reviews and says things like "Chairman's Club". I don't know for sure, but I suspect those LOs are going to offer you more competitive rates than what you would get by walking into a branch. Certainly they will tend to give better service.
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Re: Refinance Mega Thread
Thanks. On the BofA Mortgage side, they're showing 2.75%. I assume there's no chance a LO will be able to beat that. Is this a valid assumption?presto987 wrote: ↑Tue Jun 01, 2021 7:14 pmBank of America seems to be competitive on jumbos, at least for purchases. Not sure about refis.TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
I had success finding a loan officer through this link:
https://mortgage.bankofamerica.com/locator/
Try to find someone whose profile links to a lot of 5-star Zillow reviews and says things like "Chairman's Club". I don't know for sure, but I suspect those LOs are going to offer you more competitive rates than what you would get by walking into a branch. Certainly they will tend to give better service.
Re: Refinance Mega Thread
An LO can beat what is on their website, potentially by a lot.TomWambsgans wrote: ↑Tue Jun 01, 2021 7:20 pmThanks. On the BofA Mortgage side, they're showing 2.75%. I assume there's no chance a LO will be able to beat that. Is this a valid assumption?presto987 wrote: ↑Tue Jun 01, 2021 7:14 pmBank of America seems to be competitive on jumbos, at least for purchases. Not sure about refis.TomWambsgans wrote: ↑Tue Jun 01, 2021 2:10 pm Not sure if anyone is on the market for a jumbo 15FRM but here's the best I've gotten, from Wyndham Capital:
Rate: 2.625%
Mortgage amount: $940k, approx.
Closing costs: $12,611
I had success finding a loan officer through this link:
https://mortgage.bankofamerica.com/locator/
Try to find someone whose profile links to a lot of 5-star Zillow reviews and says things like "Chairman's Club". I don't know for sure, but I suspect those LOs are going to offer you more competitive rates than what you would get by walking into a branch. Certainly they will tend to give better service.
Re: Refinance Mega Thread
is there a version of this spreadsheet that includes closing costs and/or credits?
https://www.vertex42.com/Calculators/ho ... lator.html
I'm trying to compare quotes from several lenders. I'd like to understand how the closing costs affect the breakeven point. But it looks like this spreadsheet is setup to calculate extra payments on one loan, rather than comparing upfront costs and rates across several loans.
https://www.vertex42.com/Calculators/ho ... lator.html
I'm trying to compare quotes from several lenders. I'd like to understand how the closing costs affect the breakeven point. But it looks like this spreadsheet is setup to calculate extra payments on one loan, rather than comparing upfront costs and rates across several loans.
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Re: Refinance Mega Thread
Is it a hard and fast rule that you must wait 6 months after a purchase mortgage to refinance with cash out?
The appraisal on our new build came out much higher than selling price (thank you market) and we’re thinking to perhaps quickly refinance with cash out for a pool. Knowing this is possible now will sway our decision to finalize at a low or no-cost rate that is likely higher, but since refinancing, not a factor.
Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
The appraisal on our new build came out much higher than selling price (thank you market) and we’re thinking to perhaps quickly refinance with cash out for a pool. Knowing this is possible now will sway our decision to finalize at a low or no-cost rate that is likely higher, but since refinancing, not a factor.
Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
Re: Refinance Mega Thread
Not a rule, but check your loan documents to tell you if you have any sort of prepayment penalty or holding requirement.Astronaut4 wrote: ↑Wed Jun 02, 2021 11:38 am Is it a hard and fast rule that you must wait 6 months after a purchase mortgage to refinance with cash out?
I thought it was usually the other way around? But if you went with a builder's lender a refi from an online place is likely cheaper.Astronaut4 wrote: Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
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Re: Refinance Mega Thread
It’s the cash out part that might trigger the 6 mos I’ve read. No prepayment penalty clause. Not using builders lender.Mako wrote: ↑Wed Jun 02, 2021 12:35 pmNot a rule, but check your loan documents to tell you if you have any sort of prepayment penalty or holding requirement.Astronaut4 wrote: ↑Wed Jun 02, 2021 11:38 am Is it a hard and fast rule that you must wait 6 months after a purchase mortgage to refinance with cash out?
I thought it was usually the other way around? But if you went with a builder's lender a refi from an online place is likely cheaper.Astronaut4 wrote: Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
Seems counterintuitive but appears purchase rates are higher even with same term. Just an observation, not statistical.
Re: Refinance Mega Thread
Also look for someone with the title "Wealth Management Lending Officer" in addition to Zillow reviews and Chairman's Club -- they can really do great deals. We're about to close a purchase with $1.625M loan, originally quoted at 2.75% on a 30-year fixed in early May.presto987 wrote: ↑Tue Jun 01, 2021 7:14 pm Bank of America seems to be competitive on jumbos, at least for purchases. Not sure about refis.
I had success finding a loan officer through this link:
https://mortgage.bankofamerica.com/locator/
Try to find someone whose profile links to a lot of 5-star Zillow reviews and says things like "Chairman's Club". I don't know for sure, but I suspect those LOs are going to offer you more competitive rates than what you would get by walking into a branch. Certainly they will tend to give better service.
They also have a rate discount promotion for transferring outside assets to BofA or Merrill. 0.125% discount for $250K, 0.25% for $500K and 0.375% for $3M+. So we're actually getting a 30-year fixed jumbo at 2.5%. Putting the proceeds from selling our prior home into a BofA checking was enough to qualify.
- BrandonBogle
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Re: Refinance Mega Thread
I downloaded my copy of the spreadsheet back in 2017, so there are likely changes since then. In my copy, where it outlines the monthly payments and you can add individual monthly extra principal payments, the line above the first payment includes the original principal. The line above the cumulative interest is also blank, but I am able to put in a number there as it gets included in the total interest.BeerTooth wrote: ↑Wed Jun 02, 2021 9:35 am is there a version of this spreadsheet that includes closing costs and/or credits?
https://www.vertex42.com/Calculators/ho ... lator.html
I'm trying to compare quotes from several lenders. I'd like to understand how the closing costs affect the breakeven point. But it looks like this spreadsheet is setup to calculate extra payments on one loan, rather than comparing upfront costs and rates across several loans.
That all said, I would just ket in each individual entry and save off the 6-mo, 12-mo, 18-mo, etc. cumulative interest and compare between that and your current loan the same number of months from now, and see when the difference exceeds the closing costs.
Re: Refinance Mega Thread
had an interesting discovery just now
I had made a mistake in applying for refi quotes; inadvertently entered $330K remaining, instead of the actual $230K remaining.
When I corrected it with one lender, my quoted rate went up from 2.11% to 2.5% for the same 15-year FRM
I understand lenders want to finance a higher principal for more profit. Is there any way I can take advantage of this?
Cash-out 100K, then immediately pay it back to get the lower 2.11% rate?
I had made a mistake in applying for refi quotes; inadvertently entered $330K remaining, instead of the actual $230K remaining.
When I corrected it with one lender, my quoted rate went up from 2.11% to 2.5% for the same 15-year FRM
I understand lenders want to finance a higher principal for more profit. Is there any way I can take advantage of this?
Cash-out 100K, then immediately pay it back to get the lower 2.11% rate?
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Re: Refinance Mega Thread
Bumping this hopefully for more input. Knowing what I might be able to do on a potentially immediate refinance after closing on the purchase loan will help in decision making. Looks like the purchase interest rate will be 3.25 with some lender credit to minimize closing costs. IF the appraisal comes in at recent market value, would cash out refinance quickly taking borrowed amount up potentially $40k and reducing rate by .5% if assumptions are reasonably correct. But those dang assumptions burn me every time! I find nothing in purchase lenders terms disallowing this, but don’t want to assume it can be done. Anyone have anything similar?Astronaut4 wrote: ↑Wed Jun 02, 2021 12:45 pmIt’s the cash out part that might trigger the 6 mos I’ve read. No prepayment penalty clause. Not using builders lender.Mako wrote: ↑Wed Jun 02, 2021 12:35 pmNot a rule, but check your loan documents to tell you if you have any sort of prepayment penalty or holding requirement.Astronaut4 wrote: ↑Wed Jun 02, 2021 11:38 am Is it a hard and fast rule that you must wait 6 months after a purchase mortgage to refinance with cash out?
I thought it was usually the other way around? But if you went with a builder's lender a refi from an online place is likely cheaper.Astronaut4 wrote: Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
Seems counterintuitive but appears purchase rates are higher even with same term. Just an observation, not statistical.
As background, we went under contract last summer for this build. NO escalation charges in the contract and builder has been great. We got really lucky. Real estate is on fire here and hope to see good equity right away. Want to tap that at low rate to use for pool we might not have planned otherwise.
- BrandonBogle
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Re: Refinance Mega Thread
BeerTooth wrote: ↑Thu Jun 03, 2021 1:09 pm had an interesting discovery just now
I had made a mistake in applying for refi quotes; inadvertently entered $330K remaining, instead of the actual $230K remaining.
When I corrected it with one lender, my quoted rate went up from 2.11% to 2.5% for the same 15-year FRM
I understand lenders want to finance a higher principal for more profit. Is there any way I can take advantage of this?
Cash-out 100K, then immediately pay it back to get the lower 2.11% rate?
Typically cash-out refis are more expensive. Fannie Mae (and probably Freddie Mac) charge an extra premium on cash-outs. So don't simply look at a large loan amount having the same/lower rate, but that the classification change will impact the rate. Also, if you do the cash-out and they sell the loan to Fannie/Freddie, if the next lender wants to sell it to the same entity, they have to treat it as cash-out if you refi within six months, even if you don't take any more cash out. However, you may skirt buy if one of them isn't selling the loan or perhaps the sell them to different entities.Astronaut4 wrote: ↑Thu Jun 03, 2021 1:46 pmBumping this hopefully for more input. Knowing what I might be able to do on a potentially immediate refinance after closing on the purchase loan will help in decision making. Looks like the purchase interest rate will be 3.25 with some lender credit to minimize closing costs. IF the appraisal comes in at recent market value, would cash out refinance quickly taking borrowed amount up potentially $40k and reducing rate by .5% if assumptions are reasonably correct. But those dang assumptions burn me every time! I find nothing in purchase lenders terms disallowing this, but don’t want to assume it can be done. Anyone have anything similar?Astronaut4 wrote: ↑Wed Jun 02, 2021 12:45 pmIt’s the cash out part that might trigger the 6 mos I’ve read. No prepayment penalty clause. Not using builders lender.Mako wrote: ↑Wed Jun 02, 2021 12:35 pmNot a rule, but check your loan documents to tell you if you have any sort of prepayment penalty or holding requirement.Astronaut4 wrote: ↑Wed Jun 02, 2021 11:38 am Is it a hard and fast rule that you must wait 6 months after a purchase mortgage to refinance with cash out?
I thought it was usually the other way around? But if you went with a builder's lender a refi from an online place is likely cheaper.Astronaut4 wrote: Plus refinance rates always seem lower than purchase rates. Right??
Thoughts?
Seems counterintuitive but appears purchase rates are higher even with same term. Just an observation, not statistical.
As background, we went under contract last summer for this build. NO escalation charges in the contract and builder has been great. We got really lucky. Real estate is on fire here and hope to see good equity right away. Want to tap that at low rate to use for pool we might not have planned otherwise.
Re: Refinance Mega Thread
Thanks to all who have posted their refi stories and comments on this thread. I benefited from these pointers and am adding my notes below.
1. We had not considered a refi with an online lender before; this was the first time in 15+ years of home ownership. Had to overcome some misgivings about data security, no local brick-and-mortar presence etc.
2. Rate-lock to closing: 2 weeks. Fastest refi in our experience. Last year, PenFed took 7+ months.
3. Lender: Better. (Started at bankrate.com, shopped around a little via phone and email; Better offered the best rate at the time).
4. Loan amount: Just under $509,000
5. 1.875%, 15 years, 0.135% in points (about $680)
6. Costs including points + third party: approx $2400
7. No appraisal, no escrow.
A smooth online process. Underwriting/closing disclosure was completed in a week after rate lock; closing date was a week later.
I hope the servicing of the loan will be as smooth and without issues. Avoiding escrow may help with avoiding escrow related glitches (something we’ve experienced in the past).
All personnel at Better were competent and responsive. I recommend them based on our experience.
P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
1. We had not considered a refi with an online lender before; this was the first time in 15+ years of home ownership. Had to overcome some misgivings about data security, no local brick-and-mortar presence etc.
2. Rate-lock to closing: 2 weeks. Fastest refi in our experience. Last year, PenFed took 7+ months.
3. Lender: Better. (Started at bankrate.com, shopped around a little via phone and email; Better offered the best rate at the time).
4. Loan amount: Just under $509,000
5. 1.875%, 15 years, 0.135% in points (about $680)
6. Costs including points + third party: approx $2400
7. No appraisal, no escrow.
A smooth online process. Underwriting/closing disclosure was completed in a week after rate lock; closing date was a week later.
I hope the servicing of the loan will be as smooth and without issues. Avoiding escrow may help with avoiding escrow related glitches (something we’ve experienced in the past).
All personnel at Better were competent and responsive. I recommend them based on our experience.
P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
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Re: Refinance Mega Thread
Points are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am
P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
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Re: Refinance Mega Thread
If the lender were offering both options then the two options should be equivalent. Only if they were pushing one option over the other can you assume that the lender knows something you don’t.OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 amPoints are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am
P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
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Re: Refinance Mega Thread
Only that the rate table is not linear. For instance, lurkman has a $3,430 pricing improvement moving up 0.125%. If went up another 0.125% to 2.125%, maybe the pricing would only have improved $1k.OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 amPoints are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
When I have them compete, I sometime does so at a rate with points. Better is particularly easy to work with this way. I had them pricematch a 1.875% offer from Bankrate, then picked a higher rate instead. The offer at that higher rate was more expensive to me, but I knew I was far off from the sweet spot in pricing my loan and I would save more switching rates after.
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Re: Refinance Mega Thread
Lenders/Brokers are in business to make money. Most loan officers you talk to are salespeople. Their job is to part you with your money. When I talk to them they are often confused when I say my goal for a refi is to lower total cost (and probably not many people say that).OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 am
Points are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.
I am interested to know if my theory has any holes.
That being said, you are correct that points are money upfront to lower cost later. Paying a higher rate and no points and then investing the cash you would have spent is a good option - but most don't have the discipline (or time horizon).
Points are like paying down/paying off your mortgage early - they are a guaranteed return, which is what makes them attractive (no other investment I know of produces a guaranteed return that you know the results of before you commit the money). There are plenty of calculators out there that will tell you what the savings is over term and what the breakeven point is. I like th mtgprofessor refinance calculator.
As an example last year I refied my 30yr 3.325 into a 2.75 30yr with .47 points. It's saving me $300 a month and breakeven is about 1 year. Loandepot recently quoted me a 2.25 30yr refi for 2.2 points (I thought it was going to be a 2.125 with 1.6 points - which would have saved me roughly $30,000 over the term). But the official quote was too expensive to be worth it.
If you have the discipline and long time horizon VTI probably comes out better. But it's not certain. And you can also invest the monthly savings from a lower payment too - if you have the discipline.
Re: Refinance Mega Thread
OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 amPoints are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am
P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
In our case, it turned out that paying the small amount in points (and paying some closing cost while giving up the credits being offered at the higher rate) would save us about $5k, accounting for all costs, over the life of the loan. However, this is not the only consideration in play. (The above calculation becomes void if we end up moving or selling at some point between 0-15 years).
So assessing the trade-off may depend on such other individual factors.
Since Better offers a rate table with several options, those options may be equivalent for them as lenders (and their business goals in selling these mortgages in the investment market), but not for the borrower. The borrower would need to assess the options applying the borrower’s own circumstances.
For the borrower, paying high amounts in points is essentially a bet that rates will not fall further (I.e. no further refinancing would be necessary), that it’s time to lock in the lowest rate available for a long time to come. If rates fall or if the ‘long time to come’ is shortened by a move or home sale due to individual circumstances, then the arithmetic (and any benefit of paying points) is altered.
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Re: Refinance Mega Thread
To add to this… Many, many, many, many pages ago in this thread, I asked for help in deciding my options on a rate table and I remember some people saying “usually I’d say to go for zero points or slightly negative, but with these rates, perhaps buy the point because these rates are crazy low”. That was in April 2020 on my first refi in a few years. I have since refi’d four more times, getting paid to lower my rate along the way.lurkman wrote: ↑Fri Jun 04, 2021 9:19 am For the borrower, paying high amounts in points is essentially a bet that rates will not fall further (I.e. no further refinancing would be necessary), that it’s time to lock in the lowest rate available for a long time to come. If rates fall or if the ‘long time to come’ is shortened by a move or home sale due to individual circumstances, then the arithmetic (and any benefit of paying points) is altered.
The mortgage market has been crazy. And even though rates are higher now than my refi in Jan, they are still better than they were in early 2020. So keep that in mind.
FYI, my personal approach is to find a sweet spot where moving down the rate table would take me 7+ years to get ahead compared to the next rate up, and that next rate up still being a rate I could live with if I never refi again.
Re: Refinance Mega Thread
Makes good sense. Thanks for your many helpful posts on this thread.BrandonBogle wrote: ↑Fri Jun 04, 2021 9:26 amFYI, my personal approach is to find a sweet spot where moving down the rate table would take me 7+ years to get ahead compared to the next rate up, and that next rate up still being a rate I could live with if I never refi again.lurkman wrote: ↑Fri Jun 04, 2021 9:19 am For the borrower, paying high amounts in points is essentially a bet that rates will not fall further (I.e. no further refinancing would be necessary), that it’s time to lock in the lowest rate available for a long time to come. If rates fall or if the ‘long time to come’ is shortened by a move or home sale due to individual circumstances, then the arithmetic (and any benefit of paying points) is altered.
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Re: Refinance Mega Thread
In a moment I can only describe as "doh!", I thought I would share a tidbit I just hadn't thought about. I know LTV plays a role in pricing, particular along the LTV groups Fannie Mae uses in their "surcharges". And I know if a property is inspected and it comes in lower than the initial estimated value, your pricing may worsen because of the LTV change.
What I didn't think about is the reverse can be true. Since my current refi is a cash-out, my appraisal wasn't waived. Thankfully, Better didn't charge me for it since they already had waived it before I mentioned the cash-out. I had put a conservative number in with each refi since I had below 50% LTV, it didn't matter. However, apparently I was very conservative in my valuation and the appraisal value came back with such a higher value, that my lender credits went up $500. I hadn't expected pricing to improve, regardless of the appraisal.
Just thought I would share if anyone initially gets a waiver and then an appraisal is required, you may actually come out ahead because of it.
What I didn't think about is the reverse can be true. Since my current refi is a cash-out, my appraisal wasn't waived. Thankfully, Better didn't charge me for it since they already had waived it before I mentioned the cash-out. I had put a conservative number in with each refi since I had below 50% LTV, it didn't matter. However, apparently I was very conservative in my valuation and the appraisal value came back with such a higher value, that my lender credits went up $500. I hadn't expected pricing to improve, regardless of the appraisal.
Just thought I would share if anyone initially gets a waiver and then an appraisal is required, you may actually come out ahead because of it.
Re: Refinance Mega Thread
at what point in process do you actually ask a lender to beat another lender's offer?
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Re: Refinance Mega Thread
You are truly a legend!BrandonBogle wrote: ↑Fri Jun 04, 2021 12:03 pm In a moment I can only describe as "doh!", I thought I would share a tidbit I just hadn't thought about. I know LTV plays a role in pricing, particular along the LTV groups Fannie Mae uses in their "surcharges". And I know if a property is inspected and it comes in lower than the initial estimated value, your pricing may worsen because of the LTV change.
What I didn't think about is the reverse can be true. Since my current refi is a cash-out, my appraisal wasn't waived. Thankfully, Better didn't charge me for it since they already had waived it before I mentioned the cash-out. I had put a conservative number in with each refi since I had below 50% LTV, it didn't matter. However, apparently I was very conservative in my valuation and the appraisal value came back with such a higher value, that my lender credits went up $500. I hadn't expected pricing to improve, regardless of the appraisal.
Just thought I would share if anyone initially gets a waiver and then an appraisal is required, you may actually come out ahead because of it.
Re: Refinance Mega Thread
I had appraiser visit couple of days back. My house was a mess, with lawn in bad shape. He was quite cool and professional. While leaving he asked what price I was expecting. I told him that I am expecting xyz$ as per latest Zillow value, to which he said that he will look at the pricing at which houses nearby are sold. I am now hoping and praying that the value comes out closer to Zillow... fingers crossed! Can anyone share their assesser experience and the outcomes?
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Re: Refinance Mega Thread
Well, I even upped the ante. I increased the cash out so now I’m more than doubling my existing loan amount. That increased the credits even more. I wonder if Better still has a $5k ceiling for lender credits when doing a cash out?anon_investor wrote: ↑Fri Jun 04, 2021 8:47 pmYou are truly a legend!BrandonBogle wrote: ↑Fri Jun 04, 2021 12:03 pm In a moment I can only describe as "doh!", I thought I would share a tidbit I just hadn't thought about. I know LTV plays a role in pricing, particular along the LTV groups Fannie Mae uses in their "surcharges". And I know if a property is inspected and it comes in lower than the initial estimated value, your pricing may worsen because of the LTV change.
What I didn't think about is the reverse can be true. Since my current refi is a cash-out, my appraisal wasn't waived. Thankfully, Better didn't charge me for it since they already had waived it before I mentioned the cash-out. I had put a conservative number in with each refi since I had below 50% LTV, it didn't matter. However, apparently I was very conservative in my valuation and the appraisal value came back with such a higher value, that my lender credits went up $500. I hadn't expected pricing to improve, regardless of the appraisal.
Just thought I would share if anyone initially gets a waiver and then an appraisal is required, you may actually come out ahead because of it.
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Re: Refinance Mega Thread
I am surprised Better has not put you on some secret black list.BrandonBogle wrote: ↑Fri Jun 04, 2021 10:43 pmWell, I even upped the ante. I increased the cash out so now I’m more than doubling my existing loan amount. That increased the credits even more. I wonder if Better still has a $5k ceiling for lender credits when doing a cash out?anon_investor wrote: ↑Fri Jun 04, 2021 8:47 pmYou are truly a legend!BrandonBogle wrote: ↑Fri Jun 04, 2021 12:03 pm In a moment I can only describe as "doh!", I thought I would share a tidbit I just hadn't thought about. I know LTV plays a role in pricing, particular along the LTV groups Fannie Mae uses in their "surcharges". And I know if a property is inspected and it comes in lower than the initial estimated value, your pricing may worsen because of the LTV change.
What I didn't think about is the reverse can be true. Since my current refi is a cash-out, my appraisal wasn't waived. Thankfully, Better didn't charge me for it since they already had waived it before I mentioned the cash-out. I had put a conservative number in with each refi since I had below 50% LTV, it didn't matter. However, apparently I was very conservative in my valuation and the appraisal value came back with such a higher value, that my lender credits went up $500. I hadn't expected pricing to improve, regardless of the appraisal.
Just thought I would share if anyone initially gets a waiver and then an appraisal is required, you may actually come out ahead because of it.
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Re: Refinance Mega Thread
Sshhhh! But this time they ask to delay closing until after my 6 months are up. Works for me. Happy to keep this relationship golden!anon_investor wrote: ↑Fri Jun 04, 2021 10:48 pmI am surprised Better has not put you on some secret black list.BrandonBogle wrote: ↑Fri Jun 04, 2021 10:43 pmWell, I even upped the ante. I increased the cash out so now I’m more than doubling my existing loan amount. That increased the credits even more. I wonder if Better still has a $5k ceiling for lender credits when doing a cash out?
Now, how to plan how much goes to VTI?! Yup, I’m taking out funds to invest.
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Re: Refinance Mega Thread
Taking a page from my book? I guess you can't buy any more solar panels, unless you want to start your own solar farm!BrandonBogle wrote: ↑Fri Jun 04, 2021 11:38 pmSshhhh! But this time they ask to delay closing until after my 6 months are up. Works for me. Happy to keep this relationship golden!anon_investor wrote: ↑Fri Jun 04, 2021 10:48 pmI am surprised Better has not put you on some secret black list.BrandonBogle wrote: ↑Fri Jun 04, 2021 10:43 pmWell, I even upped the ante. I increased the cash out so now I’m more than doubling my existing loan amount. That increased the credits even more. I wonder if Better still has a $5k ceiling for lender credits when doing a cash out?
Now, how to plan how much goes to VTI?! Yup, I’m taking out funds to invest.
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Re: Refinance Mega Thread
I am quoting you, BB, because I'd like your thoughts on my concern about serial refinancing. I've certainly benefited from this thread and your contributions as well.BrandonBogle wrote: ↑Fri Jun 04, 2021 8:48 amOnly that the rate table is not linear. For instance, lurkman has a $3,430 pricing improvement moving up 0.125%. If went up another 0.125% to 2.125%, maybe the pricing would only have improved $1k.OrangeKiwi wrote: ↑Fri Jun 04, 2021 8:33 amPoints are a trade off between money now versus money in the future. I assume the lender knows what they are doing more often than not, and I am worse than the lender at pricing money now vs money in the future. Therefore, I assume I am better off with no points and investing any cash I may have used to buy points in VTI.lurkman wrote: ↑Fri Jun 04, 2021 8:27 am P.S. The rate table also offered 2% with about $2750 in credits; we paid a small amount ($680) in points to lower the rate to 1.875%. This turned out to be a sub-optimal choice because the rates fell the evening after we closed. Now Better is offering 1.875% (15 yr) with zero points.
I am interested to know if my theory has any holes.
When I have them compete, I sometime does so at a rate with points. Better is particularly easy to work with this way. I had them pricematch a 1.875% offer from Bankrate, then picked a higher rate instead. The offer at that higher rate was more expensive to me, but I knew I was far off from the sweet spot in pricing my loan and I would save more switching rates after.
Background: Refinanced 7/2020 from a 4% 30 year to 2.5% 15 year for $350k, <80% LTV. This was better than no-cost, netted me about $500 after lender credits.
I've been watching closely for the last year, and a month ago started the process with Better. But stopped very quickly precisely because Better is so good at showing your different rate options and your break-even period. It's not the break-even period that has me concerned.
It's the extra year of payments.
My current loan has 14 years left at $2321 per month, principal and interest. Better is offering a no-cost refi at 2.25%, which is 0.25% lower than my current rate, payment $2185 per month, saving me $136 per month for 15 years. If I multiply $136 x 12 x 15 I get $24,480, the total savings over the loan period. Or maybe it should only be 14 years. But that's splitting hairs. The real problem is that I have an extra year of payments, which is $26,220.
$26,220-24,480 = 1740
So lowering my rate costs me money. I also don't get as much of a tax deduction.
What am I missing?