Q&A: Is it more work to refinance with another mortgage company than refinancing with your current lender?

Question by marky p: Is it more work to refinance with another mortgage company than refinancing with your current lender?
Three months ago my wife and I bought our first house at a 5.5% rate. The mortgage broker who was a family friend moved on to another company. My boss’s husband owns a separate company and can do us a refi at 5.125% which would save us pretty good money. It seems complicated though like our original closing! Would I save time or money by trying to refi through Bank of America (our current lender)? Any suggestions are helpful, thanks!

Best answer:

Answer by Judy
You are making a mistake.
You do not re-fi unless you can get at least 1% rate reduction.
Some professionals say at least 1.5% reduction.
If you are not paying closing costs upfront – they are hidden in the mortgage.
That means that you will have pre-payment penalties.
If you move in 4 years – penalty.
If you decide to pay down extra payments – penalty.

You will be saving nothing by doing this refi.
In actuality, you will be paying more, much more in the future.

Google refi calculation.
Consider that most people really save by making extra mortgage payments.
Once you live in your home for a year and get settled this is the way to go.
You coud save $ 100,000 easily by just making a few extra payments a year to your principal.

Remember: Closing costs can easily add up to 10,000 dollars. They are added to the loan in most cases.
You are just creating debt for yourself.

Know better? Leave your own answer in the comments!

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4 Responses to Q&A: Is it more work to refinance with another mortgage company than refinancing with your current lender?

  1. jlf says:

    I doubt that a refi will save you money overall. You can’t be blinded just by interest rate. You have to consider what the refi will cost you in fees and points. How many years will it take you to recover that layout in “savings” on the monthly payment?

  2. Glenn S says:

    The work involved with your old lender or new lender is about the same, unless you are doing a FHA streamline refi, when it would probably be easier to stick with your current lender. If you have an FHA loan and 20% equity do a conventional refi.

    How long are you planning to stay in this property? If you are going to stay in it more than 5 years it would probably be a good move, but anything much less than that you it will probably cost you more than it will save unless with the new refi you will be getting rid of PMI/MMI. If that is the case it would be a smart thing to do for sure. What you might consider is doing a 15 year refi. The current conventional interest rates, with 20% equity is about 4.5% with 0 points. That was the quote I got late last week, and that was for a non-owner occupied property through the Mortgage Minute Guy.

    FHA, Freddie-Mac, or Fannie-Mae loans do not have any pre-payment penalties. Judy doesn’t have a clue. $ 10,000 in refi closing costs? Maybe if your are borrowing $ 750,000.

    Consider getting a quote from a couple of lenders like Ditech and Quicken Loans. Their rates and costs are very competitive.

  3. angela says:

    Since it’s been 3 months then it will probably be the same either way. Appraisals are only good for either 30 or 60 days so either bank will require a new appraisal. They will both do credit checks and have closing costs, etc. You might want to make sure the company that is offering 5.125% isn’t charging any points. 1 point equals 1% of the loan value and points are paid upfront at the time of closing. Some banks charge points in order to charge a lower interest rate. Since you’ve only had your loan for 3 months I don’t see how it would benefit you to refinance but anything’s possible. You will have to pay closing costs all over again and the only payments you’ve made thus far have pretty much been interest. Do you have enough equity to refinance? On a refinance they will only give 80 – 90% (depending on the lender) of the value of the home.

  4. Oaf Johnson says:

    If you are currently at a rate of 5.5% you do not need to refinance. 4.5% would be the target rate if I were at 5.5%. Pre-payment penalties are a thing of the past for most lenders but some may still carry one. I doubt seriously you would have one with Bank of America but you never know. Depending on what type of loan you got initially you could be eligible for some kind of Streamlined refinance product that could decrease your over all costs. Remember to check on a re-issue credit on your title work and that will save you a little if you decide to proceed. I hope this helps.

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