Mortgage question

[Juggernauts 0]

I fully plan on moving within 2-3 years, currently owe about 91% of my current house value. My interst rate is 5.25% on a 30 year mortgage. I have excellent credit scores (mid 700's).

 

I got a call from a bank yesterday asking me to refinance. I explained I'm not interesetd in paying the $2,500 closing costs to gain a couple decimal point deduction in my interest rate (assuming I'd get a 4.99% new rate on a 30 year mortgage.) because I'll be moving in a couple of years.

 

The lady said she was calling about an adjustable rate program where I could get 3.99% for 5 years and would probably save me about $100 a month on my current payment. She also said there is a flat rate fee of $250 which I think sounds too good to be true. I've confirmed with her twice that the only costs is $250 and they're not just rolling the other $2,250 into the mortgage.

 

I know ARM loans have been a target in the media as a reason for the huge foreclosures and all that, but if I'm planning on moving in 2-3 years anyway, it makes sense to me to do it.

 

Anyone out there with more experience in the mortgage business with any thoughts on advice or questions I should be sure to ask.

[NorthernVike 2,081]

As long as you are sure you are moving, I see no harm in the refi. Now if your job takes off and you decide to stay you will prolly have to refi angain in the next five years, but if you are sure you are gone, go for it.

[redtodd 7]

I have no clue about her closing costs, but aside from that ARM's are fine if you are very sure you will be moving within 5 years.

[surferskin 30]

When it sounds too good to be true, it usually is BUT...

 

I guess it couldn't hurt to move forward and you'll get to see the truth in lending statement before you sign anything. Just make sure they don't add in anything at the last minute.

[RLLD 3,588]

What if you buy, using the ARM, and the market remains stagnant, or gets worse, and you owe more than you can get, and cannot sell.....I would not trust an ARM in the current market.....

[Juggernauts 0]

What if you buy, using the ARM, and the market remains stagnant, or gets worse, and you owe more than you can get, and cannot sell.....I would not trust an ARM in the current market.....

 

 

My concern as well, but I guess I'm relatively optimistic that I'll be able to sell my house in 5 years. I've put a lot of work into it with new energy efficient windows, furnace, central air, plus other updgrades, that a lot of houses (at least in my neighborhood) don't currently have.

[Juggernauts 0]

As long as you are sure you are moving, I see no harm in the refi. Now if your job takes off and you decide to stay you will prolly have to refi angain in the next five years, but if you are sure you are gone, go for it.

 

 

I'll be moving in 2-3 years, NOT because of my job but because my family is growing and we need more room. Our house is a great young family home, but as the kids get older there just isn't enough room. So, regardless of my job (unless of course I lose it) I'll be moving.

[G-in O-town 0]

First things first, get a "initial fees worksheet" it's like the old good faith estimate before our govt changed the look and requirements for it. We can no longer provide the GFE for comparison like in the past now essentially we have to do the loan application, pull credit and get fees to be able to deliver the GFE.

The cost work sheet should spell out the costs, rate and terms you are looking at, do this before ever agreeing to proceed. Also check if this is an FHA or Conventional mortgage, since you only have 9% equity in the property you will have mortgage insurance. Was the loan officer aware your at a 91% LTV?

All these things will pop up once you get the cost worksheet. Do this then post back.

On the surface it seems like a good deal based on your circumstances but get something in writing as your first step. Also double check and see if there is a pre-payment penalty. HTH

 

Quick FYI~ Mortgage rates are currently at historic lows.

[Juggernauts 0]

First things first, get a "initial fees worksheet" it's like the old good faith estimate before our govt changed the look and requirements for it. We can no longer provide the GFE for comparison like in the past now essentially we have to do the loan application, pull credit and get fees to be able to deliver the GFE.

The cost work sheet should spell out the costs, rate and terms you are looking at, do this before ever agreeing to proceed. Also check if this is an FHA or Conventional mortgage, since you only have 9% equity in the property you will have mortgage insurance. Was the loan officer aware your at a 91% LTV?

All these things will pop up once you get the cost worksheet. Do this then post back.

On the surface it seems like a good deal based on your circumstances but get something in writing as your first step. Also double check and see if there is a pre-payment penalty. HTH

 

Quick FYI~ Mortgage rates are currently at historic lows.

 

 

Excellent advice. Thanks you.

[Juggernauts 0]

Okay...I have 2 updates:

 

1.) When they ran the numbers, because I currently owe about 91% of the current value of my house, I only qualify for a rate of 4.99%. The lady asked the people above her since our credit is good (755) if they would be willing to make an exception for us and give us the 3.99% rate and they CHOSE not to. When refinancing I'd save about $75 a month mostly because it's based on a 30 year term and instead of having only 22 years to pay off the house, I'd be back to 30.

 

2.) I received a copy of the Good Faith Estimate and on it, the rate was 5.49% and there WAS a fee of over $2,500.

 

I think what I'm going to do is tell them since they are asking me to take on a risk that in 5 years I can't sell my house and then get stuck with an increased interest rate, it's not currently worth it to me to refinance for only a .25% decrease in my current rate. They apprently CAN give me 3.99% if they want to, but since they chose no to, I choose NOT to refinance. If they give me the 3.99% then I'd reconsider.

 

My guess is they won't give me 3.99%, but if they do, then I'll ask why if closing costs are supposed to be a flat rate fee of $250 why the GFE said it was over $2,500.

[NorthernVike 2,081]

Okay...I have 2 updates:

 

1.) When they ran the numbers, because I currently owe about 91% of the current value of my house, I only qualify for a rate of 4.99%. The lady asked the people above her since our credit is good (755) if they would be willing to make an exception for us and give us the 3.99% rate and they CHOSE not to. When refinancing I'd save about $75 a month mostly because it's based on a 30 year term and instead of having only 22 years to pay off the house, I'd be back to 30.

 

2.) I received a copy of the Good Faith Estimate and on it, the rate was 5.49% and there WAS a fee of over $2,500.

I think what I'm going to do is tell them since they are asking me to take on a risk that in 5 years I can't sell my house and then get stuck with an increased interest rate, it's not currently worth it to me to refinance for only a .25% decrease in my current rate. They apprently CAN give me 3.99% if they want to, but since they chose no to, I choose NOT to refinance. If they give me the 3.99% then I'd reconsider.

 

My guess is they won't give me 3.99%, but if they do, then I'll ask why if closing costs are supposed to be a flat rate fee of $250 why the GFE said it was over $2,500.

 

 

I'd tell them to go fock themselves.

[surferskin 30]

When it sounds too good to be true, it usually is

[RLLD 3,588]

I'd tell them to go fock themselves.

 

 

This

[Juggernauts 0]

I'd tell them to go fock themselves.

 

 

I figure I'll try "negotiating" to 3.99%. That can't hurt especially in the local paper on Sunday, there are similar banks offering 3.65%. Of course if there IS a $2,500 fee she's trying to put past me THEN I'll tell them to go FOCK themselves!!!

[KSB2424 3,088]

Everybody thinks they are going to move to a nicer house in 3 or so years. 90% of the time they don't. You have a 5.25% fixed rate which is good enough. Stop wasting your time and focus on other things.

[G-in O-town 0]

This is why it is so important to get that "cost worksheet" ie GFE nothing is hidden as there might be in the initial phone conversations with the loan officer. The days of no closing cost refi are few and far between and if you do find one your interest rate would probably be .625% higher then the going rate. I run into these banks and mortgage companies promoting these so call "flat fee" refis and the end result is exactly what you encountered there are still costs such as title insurance, govt stamps and appraisals to name a few, the flat fee might be just the fee they charge. I would seriously reconsider using this bank for they were not exactly upfront with you to start and if it's because of your LTV the loan officer should have been knowledgeable enough to know a higher LTV means a higher rate, part of their job is to get all the information upfront so as to be spot on with their quote. ALWAYS get the GFE or cost worksheet before you commit.

Their deal on the table now