Question by glamorousvivica: Does anyone know anything about refinancing a mortgage?
I am not behind on my mortgage, nor have I ever been behind or paid late. But I was contacted by my lender…Chase Home Finance…a couple of weeks ago telling me I as eligible to refinance to a lower rate…almost 2 percent lower than I pay now…with no closing costs. They said they were extending this offer to clients in good standing only. So I got the good faith estimate yesterday, and they have added $ 1100.00 to the loan for home owner’s insurance. Ummm….I already have a homeowner’s insurance policy…which I have had since the life of my mortgage…with State Farm. I pay it directly and it covers replacement cost of the home, not just current value. My question is, when Chase is already aware that I carry this policy, why would they charge me for this?
Judy – I did all that. The loan is for the same time frame as my current loan, and it is 2% less than what I pay now. There are no other closing costs, except tax stuff, which I already have in escrow. But yeah…the insurance thing threw me for a loop. I already responded to the good faith estimate email they sent me and told them NO WAY am I signing any loan papers requiring me to pay their home owner’s insurance. We are scheduled to close on Thursday, but I won’t if it’s in there.
The loan is scheduled to be paid off in 15 years, and I am refinancing the same amount of years. It’s only a 15 year mortgage. The money I save on the lower rate will allow me to pay additional $ $ towards my principal…which I already do with my old loan. No early payment penalties on this loan, or the original loan, either.
To the third answer…according to the good faith estimate…it’s ‘hazard’ insurance. And according to the Chase Home Financial website, ‘hazard insurance’ is the same as ‘home owner’s insurance.’ What you are talking about…mortgage insurance…is usually only required on loans without equity. I have a ton of equity. ALSO…they quoted me a rate of 4.27% which is currently locked in until October 15th. I now pay 6.25%.
Answer by Judy
From Money Magazine.
Only re-fi if you can get 1.93% lower interest rate.
And only if you do NOT make your loan a longer term than it already is.
That will just make you poorer in the long run.
Only refi if you know you will be in the home for more than 5 to 7 years.
The closing costs will be added to the loan – nothing in this world is free.
Be careful with them jacking up that interest rate at the last miniute.
They will get you all hiped up, and then give you the higher rate – keep an eye on them.
A company can not force you to use their insurance company.
Demand that the insurance not be added to escrow.
Their company could double next year – and you might be forced into carrying their insurer for the life of the loan – it could be a trick.
Careful with Chase – watch their every move.
These closing costs – have me a bit scared – again – nothing in this world is free.
They will get the closing costs from you somehow.
Google : average closing costs calculator
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Sounds like one hand doesn’t know what the other hand is doing. Contact them and tell them you pay your taxes and insurance separately.
2% is good rate for saving money. But how long have you been paying on your mortgage? If this starts you back at 30 years and you won’t get out of debt until you’re 85, not a good deal. Unless you can accelerate your mortgage, so you will be out of debt by time you retire, or you have a long-term plan and are knowledgeable in using your equity in your home wisely.
So, this is why you get a good faith estimate. Question this to your satisfaction.
Well first it depends on what type of insurance they added. Some banks are now requiring mortgage insurance (in case you can not pay the mortgage), so that may be the cost.
Or.. they may routinely add in the cost of an insurance policy to the closing costs since you must provide them with new proof of insurance. Then, when you do, they take it out.
OR… they may wish to create an impound account for you and pay the insurance from that.
Bottom line.. you need to ask exactly the same question(s) to Chase….
BUT.. for your information… Currently I am being offered a 30 year fixed rate of 4.37 and change as I make inquiries about refinancing.. you said that your offer is 2% less then what you are paying now, but that does not give the proposed rate. If the offered rate is not close to this number (in the last week of September) then you may want to shop around some more anyway.
When you ask your lender about this you will find the amount is not a fee, but an estimate for the annual cost of your hazard or home owner’s insurance. Even though they already have information about your policy in file, they are making this offer to hundreds if not thousands of their customers and the number for the estimate was generated by a formula, not by looking up your actual premium. They are required to include and estimate of the cost whether you pay it with the loan or separately because either way you are paying for it. The “new and improved” 2010 Good Faith Estimate has succeeded in confusing borrowers more, not less. Thank your Congressman next time you see him.
You appear to be getting a competitive rate. Lenders do the “no closing cost” loan by adding 3/8% to 1/2% to the rate that includes closing costs. There is nothing crooked or deceptive about it and it actually makes sense for many people to do it this way, especially if they are not sure if they will remain in the home or the loan long enough to recoup standard closing costs. The only possible downside is that you might save more in the long run by paying the fees and taking the lower rate if you should remain in the loan for the remainder of the contract.