Need help regarding Refinance - feels like I am being ripped off!

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Topic Author
ajm1489
Posts: 54
Joined: Mon Apr 15, 2019 3:31 pm

Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

Hello all,
I am in the process of refinancing my home with Rocket Mortgage. After reading the thread here about refinancing i feel like I am being ripped off.
Current : 30 yr mortgage with 3.75 (loan began Oct 2016)
Quote from Rocket : 3.375 30 year mortgage, closing cost $6800, will be rolled into the mortgage. I don't have to pay anything out of pocket at the moment. Along with this I will get $2500 statement credit from Amex.

Please share your thoughts on this. I am totally new to all this and it is overwhelming. The mortgage agent is pushing to close ASAP which increases my doubt about being ripped off. Any input is hugely appreciated.

AJM
Shael_AT
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Joined: Mon Jul 15, 2019 2:36 pm

Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Shael_AT »

What is the real savings per month after refi?

Does that $ amount over 12 months = or > closing cost?

If yes, continue

If no, re-asses, with criteria such as "will I be in this house >3 years? do I intend to pay it off? other rationalizations, etc"

Good luck
MathWizard
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Joined: Tue Jul 26, 2011 1:35 pm

Re: Need help regarding Refinance - feels like I am being ripped off!

Post by MathWizard »

ajm1489 wrote: Thu Mar 26, 2020 2:37 pm Hello all,
I am in the process of refinancing my home with Rocket Mortgage. After reading the thread here about refinancing i feel like I am being ripped off.
Current : 30 yr mortgage with 3.75 (loan began Oct 2016)
Quote from Rocket : 3.375 30 year mortgage, closing cost $6800, will be rolled into the mortgage. I don't have to pay anything out of pocket at the moment. Along with this I will get $2500 statement credit from Amex.

Please share your thoughts on this. I am totally new to all this and it is overwhelming. The mortgage agent is pushing to close ASAP which increases my doubt about being ripped off. Any input is hugely appreciated.

AJM
Closing costs seem really high, are you paying points?

The refinance calculator from nerdwallet suggests that you would needed to have had an original mortgage of about $285K or more
for you to save interest, or originally $230K if your new mortgage was about 27 years (the remainder of your current 30 year mortgage.)
I am not considering the $2500 Amex credit, which is essentially a cash out.

Code: Select all

https://www.nerdwallet.com/mortgages/refinance-calculator/calculate-refinance-savings
Planner01
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Planner01 »

For less than 1/2 of a point reduction in rate I am not sure why would anyone go through the trouble of refinancing. I personally think that refinancing is worth for a savings of at least a 1%+ reduction.
Big Dog
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Big Dog »

what't the balance and APR?
Mako
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Location: MD

Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Mako »

Others have covered whether this even makes sense. If you still want to do it, look at aimloan.com, lenderfi.com, better.com, penfed.org, local credit unions, and many others mentioned on this site. Your closing costs look very high for that rate although it depends on a many different factors.

When I purchased two years ago Rocket was totally uncompetitive and also very pushy with selling.
Topic Author
ajm1489
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

Thank you for the responses. We would like to keep this house as a rental since we have plans to move in the next year which is why I though of refinancing. I dont know about any points, the only thing they mentioned was $6800 that will be added to the mortgage.
Tribonian
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Tribonian »

From what you present, it seems high to me. Closing with LenderFi today and they offered > $2k credits and lower 30 year rates 17 days ago.
HomeStretch
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by HomeStretch »

I can’t say whether the refi terms you listed are fair or not. You need to shop deals/rates to make that determination.

You didn’t say what your mortgage balance to be refinanced is but if it is ~$250k, your payback period is almost 7 years even taking into account the AMEX credit. I would pass on a 7 year payback period.

You didn’t post the components of the closing costs. Not sure if points and/or escrow fees are included. You should receive a refund of any escrow fees from the current lender if you refinance.
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Nate79
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Nate79 »

I find it best to shop on a comparable basis meaning no closing costs (ignoring escrow) and compare the interest rates.
Topic Author
ajm1489
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

My current mortgage balance is $198,417.
Closing cost has origination charges, appraisal fee, title fee, taxes, insurance premium and escrow.
primetime
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by primetime »

I owe $150k on mine and house is valued at $285k

According to the loan officer, my total closing cost will only be $300 + any per deim interest, which based on closing date looks to be around $500. All depends on when they pay the current bank that I have the loan through. I told them that the loan amount better be the actual payoff amount, and that I don’t want any of the approx $800 in closing cost put into the loan. I’ll pay that out of pocket. Rate was a 30 year at 4.25 and new rate is 2.8 at 15 years. My payment only goes up $40 a month.

Still waiting on my good faith estimate or hud statement. Already setup a closing date so everything better be what was promised initially. If they try to hit me with $2k in closing costs I’ll walk, wait for the rate to go back down. total interest saved in the next 15 years is about $25k

So yeah, $6800 in closing costs I think they are trying to rip you off.
Topic Author
ajm1489
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

thank you for all the responses. I think my FICO score of 694 is what is causing this closing cost. My wife has 722, will it help adding her on the mortgage?
taurabora
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by taurabora »

Check mtgprofessor.com for a quick sanity check.
Carpenterant
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Carpenterant »

I went with another company because they weren’t competitive at all. They keep calling me even after I told them I went with someone else. I actually had to block their number after telling three people I was not going to use them and was working with another company. They called from another number so I blocked that one. I am all for following up but I will never recommend them and will steer anyone I can away. I would suggest looking elsewhere.
Carpenterant
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Carpenterant »

Actually as I rehash this out it reminds me I need to leave bad reviews online
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galawdawg
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by galawdawg »

Several observations. First, I found Rocket Mortgage not to be at all competitive when I got a quote from them to refinance in 2013. Not only was their rate and costs the highest I found, but they were very aggressive and wouldn't take "no thanks" for an answer until I blocked their calls and emails. I would suggest you consider other lenders either for a refi or your next purchase.

Second, your FICO score most certainly is affecting the rates and costs you have been/will be offered. Since rates are back up again from their historic low a few weeks ago, you may want to pause any refinance and work on getting those FICO scores up. If you haven't already, check out Credit Karma (a free service) which will let you keep an eye on your FICO score as it updates and get information on what factors are bringing it down. The minimal rate reduction you are considering isn't worth the money or time of a refinance right now so there isn't any real downside to waiting. Once you get your FICO score up above 740-760, you may find even better refinance options.

By adding $6,800 to your mortgage balance, any reduction in your monthly payment is really due to spreading out your loan from the current 26.5 years remaining to 30 years. You don't really get any improvement in the amount of interest you are paying with that .325 rate reduction. Also, if you are planning on moving and turning your current house into a rental, the mortgage interest for the rental property would be deductible as an expense on Schedule E. So I don't see any reason to refinance right now based upon what you have shared.

In long run, you would be much better served if you work on getting those FICO scores up as high as possible so that when you purchase your next home, you get much more favorable rate terms.
mortfree
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by mortfree »

Someone has to pay for all their advertising.

As a few other posters mentioned, when looking at the fees / costs be sure to split them out.

If they are forcing you to fund/pay property taxes as part of the process (escrow account) I would subtract that out from the overall costs. It’s something you would have had to pay.

I looked into refinancing and my credit union was estimating about $3600 in fees on a 180k mortgage. I do not have an escrow account with the lender.

Good luck!
dsmil
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by dsmil »

ajm1489 wrote: Thu Mar 26, 2020 4:05 pm My current mortgage balance is $198,417.
Closing cost has origination charges, appraisal fee, title fee, taxes, insurance premium and escrow.
Origination charges, appraisal fees, and title/taxes are your real closing costs. Don't include the insurance and escrow amounts, because those are just amounts that you are prepaying. You'll likely get a refund in a few weeks of whatever currently sits in your current escrow account. What are your closing costs if you just include origination, appraisal, title/taxes? Mine were recently $3k.
ajm1489 wrote: Thu Mar 26, 2020 8:06 pm thank you for all the responses. I think my FICO score of 694 is what is causing this closing cost. My wife has 722, will it help adding her on the mortgage?
The credit score would affect the interest rate, but probably not these closing costs. It's possible that adding your wife's higher credit score and income would help with the rate, but it doesn't look like a bad rate to me with those scores.
ajm1489 wrote: Thu Mar 26, 2020 3:09 pm Thank you for the responses. We would like to keep this house as a rental since we have plans to move in the next year which is why I though of refinancing. I dont know about any points, the only thing they mentioned was $6800 that will be added to the mortgage.
Seeing that you are going to move out of this house, I don't think refinancing makes sense right now, especially for only $40 in savings per month. Even if your true costs are more like $3k (subtracting taxes, escrows, amex refund), that takes 6 years to pay back. Are you confident that you are going to keep this house for a long time? Seeing that you haven't rented it before, it's likely that your thoughts could change after renting it, and if you sell it, you'll then owe $7k more on the house. Apart from that, keeping a mortgage on this house could also affect your ability to get a mortgage on the next house, especially if this one has never been rented by you before. A lender on the next house could be more hesitant since you'd already have a mortgage with no rent history. Even if they do give you another mortgage, it might be at a higher rate. 3.75% is a fine rate so I think the prudent move would be to hold off for now. First you'll want to figure out if keeping this mortgage will affect your ability to get a mortgage on the next house. If it does, you'll have to sell the house and will be better off not doing the refinance. If you can get the new house, rent the old one and know that you will keep it for awhile, then I'd revisit the refinance, but I'd still be hesitant about doing it for a $40 per month savings.
SirWalter
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by SirWalter »

ajm1489 wrote: Thu Mar 26, 2020 2:37 pm Hello all,
I am in the process of refinancing my home with Rocket Mortgage. After reading the thread here about refinancing i feel like I am being ripped off.
Current : 30 yr mortgage with 3.75 (loan began Oct 2016)
Quote from Rocket : 3.375 30 year mortgage, closing cost $6800, will be rolled into the mortgage. I don't have to pay anything out of pocket at the moment. Along with this I will get $2500 statement credit from Amex.

Please share your thoughts on this. I am totally new to all this and it is overwhelming. The mortgage agent is pushing to close ASAP which increases my doubt about being ripped off. Any input is hugely appreciated.

AJM
I didnt read through every single response, but if you are escrowing your taxes on this mortgage, most of the $6800 is prepaying the escrow balance. If you are not escrowing, then yes, those costs seem exorbitant and you should run away.
Nowizard
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Nowizard »

The assumption is that the only reason this would be considered is to save money. Figure it. Take your current mortgage amount, subtract any additional amounts for home insurance, taxes, etc. since these will be the same and compare to the proposed amount. Realize you would be increasing your current mortgage with closing costs added. That is a starting point, and the probability is that it will lead to discovering this is not worth it unless there are other significant factors not posted.

Tim
Topic Author
ajm1489
Posts: 54
Joined: Mon Apr 15, 2019 3:31 pm

Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

Carpenterant wrote: Thu Mar 26, 2020 8:32 pm I went with another company because they weren’t competitive at all. They keep calling me even after I told them I went with someone else. I actually had to block their number after telling three people I was not going to use them and was working with another company. They called from another number so I blocked that one. I am all for following up but I will never recommend them and will steer anyone I can away. I would suggest looking elsewhere.
The only reason I went with rocket mortgage was for the Amex offer of $2500 statement credit.
Topic Author
ajm1489
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Joined: Mon Apr 15, 2019 3:31 pm

Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

galawdawg wrote: Fri Mar 27, 2020 6:54 am Several observations. First, I found Rocket Mortgage not to be at all competitive when I got a quote from them to refinance in 2013. Not only was their rate and costs the highest I found, but they were very aggressive and wouldn't take "no thanks" for an answer until I blocked their calls and emails. I would suggest you consider other lenders either for a refi or your next purchase.

Second, your FICO score most certainly is affecting the rates and costs you have been/will be offered. Since rates are back up again from their historic low a few weeks ago, you may want to pause any refinance and work on getting those FICO scores up. If you haven't already, check out Credit Karma (a free service) which will let you keep an eye on your FICO score as it updates and get information on what factors are bringing it down. The minimal rate reduction you are considering isn't worth the money or time of a refinance right now so there isn't any real downside to waiting. Once you get your FICO score up above 740-760, you may find even better refinance options.

By adding $6,800 to your mortgage balance, any reduction in your monthly payment is really due to spreading out your loan from the current 26.5 years remaining to 30 years. You don't really get any improvement in the amount of interest you are paying with that .325 rate reduction. Also, if you are planning on moving and turning your current house into a rental, the mortgage interest for the rental property would be deductible as an expense on Schedule E. So I don't see any reason to refinance right now based upon what you have shared.

In long run, you would be much better served if you work on getting those FICO scores up as high as possible so that when you purchase your next home, you get much more favorable rate terms.
Thank you r these for these excellent feedback. Yes, I am working on getting the FICO score up. It went down 39 points since a credit card company lowered y credit limit since i was not using that card. As per credit karma, if I request a credit limit increase on my existing credit cards my score will go up. So I have done that and my credit limit has gone up by $14000, fingers crossed to see the positive change in FICO score.
Topic Author
ajm1489
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

dsmil wrote: Fri Mar 27, 2020 7:49 am
ajm1489 wrote: Thu Mar 26, 2020 4:05 pm My current mortgage balance is $198,417.
Closing cost has origination charges, appraisal fee, title fee, taxes, insurance premium and escrow.
Origination charges, appraisal fees, and title/taxes are your real closing costs. Don't include the insurance and escrow amounts, because those are just amounts that you are prepaying. You'll likely get a refund in a few weeks of whatever currently sits in your current escrow account. What are your closing costs if you just include origination, appraisal, title/taxes? Mine were recently $3k.
ajm1489 wrote: Thu Mar 26, 2020 8:06 pm thank you for all the responses. I think my FICO score of 694 is what is causing this closing cost. My wife has 722, will it help adding her on the mortgage?
The credit score would affect the interest rate, but probably not these closing costs. It's possible that adding your wife's higher credit score and income would help with the rate, but it doesn't look like a bad rate to me with those scores.
ajm1489 wrote: Thu Mar 26, 2020 3:09 pm Thank you for the responses. We would like to keep this house as a rental since we have plans to move in the next year which is why I though of refinancing. I dont know about any points, the only thing they mentioned was $6800 that will be added to the mortgage.
Seeing that you are going to move out of this house, I don't think refinancing makes sense right now, especially for only $40 in savings per month. Even if your true costs are more like $3k (subtracting taxes, escrows, amex refund), that takes 6 years to pay back. Are you confident that you are going to keep this house for a long time? Seeing that you haven't rented it before, it's likely that your thoughts could change after renting it, and if you sell it, you'll then owe $7k more on the house. Apart from that, keeping a mortgage on this house could also affect your ability to get a mortgage on the next house, especially if this one has never been rented by you before. A lender on the next house could be more hesitant since you'd already have a mortgage with no rent history. Even if they do give you another mortgage, it might be at a higher rate. 3.75% is a fine rate so I think the prudent move would be to hold off for now. First you'll want to figure out if keeping this mortgage will affect your ability to get a mortgage on the next house. If it does, you'll have to sell the house and will be better off not doing the refinance. If you can get the new house, rent the old one and know that you will keep it for awhile, then I'd revisit the refinance, but I'd still be hesitant about doing it for a $40 per month savings.
Thank you for explaining everything in detail. I thought about the second home affordability factor. Went on bankrates.com to see how much home we can afford and it looks like we can afford the current one and another one in the price range we are looking. But you have a good point there, I dont know how much I will enjoy renting out the house and might decide to sell this earlier than currently planned.Thank you for the feedback.
Topic Author
ajm1489
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by ajm1489 »

Sincere thank you to everyone who posted their feedback. Every information that you all shared has helped me learn more about this process and that is the main reason why I am on this forum - education.
I have made the decision to stop the refinance process, from the comments here it would be hard to get rid off Rocket mortgage people..lol.
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Jack FFR1846 »

ajm1489 wrote: Thu Mar 26, 2020 3:09 pm Thank you for the responses. We would like to keep this house as a rental since we have plans to move in the next year which is why I though of refinancing. I dont know about any points, the only thing they mentioned was $6800 that will be added to the mortgage.
You should only be looking at zero cost refi's. When you convert to a rental, your mortgage should technically be paid off and a new one for a rental started. There is likely wording in your mortgage that the loan is only for an owner occupied residence.....not for a rental.
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Silly Wabbit
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Silly Wabbit »

Jack FFR1846 wrote: Fri Mar 27, 2020 9:27 am
ajm1489 wrote: Thu Mar 26, 2020 3:09 pm Thank you for the responses. We would like to keep this house as a rental since we have plans to move in the next year which is why I though of refinancing. I dont know about any points, the only thing they mentioned was $6800 that will be added to the mortgage.
You should only be looking at zero cost refi's. When you convert to a rental, your mortgage should technically be paid off and a new one for a rental started. There is likely wording in your mortgage that the loan is only for an owner occupied residence.....not for a rental.
These restrictions are not common for primary residences. At least in my experience.

Where does such a restriction show up on the loan disclosure?

I hear 2nd home loans tend to be less permissive.
Mako
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by Mako »

Silly Wabbit wrote: Fri Mar 27, 2020 9:47 am
Jack FFR1846 wrote: Fri Mar 27, 2020 9:27 am You should only be looking at zero cost refi's. When you convert to a rental, your mortgage should technically be paid off and a new one for a rental started. There is likely wording in your mortgage that the loan is only for an owner occupied residence.....not for a rental.
These restrictions are not common for primary residences. At least in my experience.

Where does such a restriction show up on the loan disclosure?

I hear 2nd home loans tend to be less permissive.
FWIW, mine says it has to be my primary residence for one year. OP should check their paperwork. This is in my deed of trust, which is not used in all states.
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galawdawg
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Re: Need help regarding Refinance - feels like I am being ripped off!

Post by galawdawg »

Jack FFR1846 wrote: Fri Mar 27, 2020 9:27 am ...When you convert to a rental, your mortgage should technically be paid off and a new one for a rental started. There is likely wording in your mortgage that the loan is only for an owner occupied residence.....not for a rental.
Actually most mortgages now contain occupancy language that only requires occupancy as principal residence for a specific period of time, such as:
Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless the Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond the Borrower's control.
So if OP is thinking about converting his primary residence to a rental within twelve month after refinance, this is another reason to hold off on a refinance. While it is unlikely the lender would "unreasonably" withhold consent to convert to a rental, it is easier to avoid the issue and not refinance at this point. But, unless in the very unlikely event OP's mortgage requires occupancy for the full term, there is no reason OP would be required to pay off the current mortgage and get a new one. And unless rates significantly drop, getting a new mortgage after converting to a rental would also not be advantageous as rates for investment residential property are usually higher than for owner-occupied.
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