As rates lower, and moreso as they approach 4%, the ROI on refinancing for me is looking more and more promising. Is there any advice people have for a guy going through a refinance?
I'm planning on doing a 30-year fixed, but the usual spread (.5% between 15 and 30 year) is now more lik .8%, so I'm tempted to take on a 15-year mortgage, though that'd put me in a bit of a tight crunch cash-flow wise.
My wife's going back to school for being a teacher, so I figured maybe wait a couple years, and when she gets her new job, refinance then, as I'm relatively confident rates will stay low for some time.
I'm currently at about 90% LTV after putting 10% down.
Refinancing Your Mortgage
Moderator: Global Moderator
Refinancing Your Mortgage
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Refinancing Your Mortgage
Get a GFE on the refi closing costs to make sure the savings are worth the hassle. I prefer the 5yr ARM over the 30yr fixed. 150bps was too much spread to pass up in my situation, although you might not feel comfortable with it depending on your asset level and liquidity. Just do whatever you can to get your LTV at 80% or under so you can ditch the PMI.
Re: Refinancing Your Mortgage
I also somewhat like the idea of a 5 year arm, except I feel like having a callable long-term loan is sort of a nice way of playing "heads, I win, tails you lose" with investing. If rates drop significantly more, I can always refinance or pay down my lown. If they go up, I hold my loan and invest elsewhere.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Refinancing Your Mortgage
Ask about a 20 year mortgage. That was what I got when I first purchased. Not widely known but it is an option.moda0306 wrote: As rates lower, and moreso as they approach 4%, the ROI on refinancing for me is looking more and more promising. Is there any advice people have for a guy going through a refinance?
I'm planning on doing a 30-year fixed, but the usual spread (.5% between 15 and 30 year) is now more lik .8%, so I'm tempted to take on a 15-year mortgage, though that'd put me in a bit of a tight crunch cash-flow wise.
My wife's going back to school for being a teacher, so I figured maybe wait a couple years, and when she gets her new job, refinance then, as I'm relatively confident rates will stay low for some time.
I'm currently at about 90% LTV after putting 10% down.
"Machines are gonna fail...and the system's gonna fail"
Re: Refinancing Your Mortgage
I did a 20 year once as well.
Great choice.
Great choice.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
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Re: Refinancing Your Mortgage
I never knew about the 20-year, but that sounds like something worth looking into. I'd say that if the 15's going to put you in anything resembling a cash crunch, I'd pass. We went to a 15 only when we were completely sure we'd be able to easily pay it even if my wife or I became long-term unemployed.
Wonk is right that you want to really try to get out from under mortgage insurance if you can help it. Banks know that 80% LTV mortgages are extremely safe and you'll get the best possible treatment and rates during the process. (If all mortgages were 80% LTV, there would have certainly never been a housing crisis. Banks understand this.)
I'm a little surprised that the ARM is attractive to you. If rates increased sharply after 5 years, wouldn't this cause you some cash-flow trouble? You'd need to have a good ratio of available liquidity to the size of your mortgage to guard against that. Then again, 5 years of lower rates would give you time to nicely build your savings.
Once you start the refinancing process, stay on top of the loan document specialist \ manager person to make sure they keep things moving. They are sometimes overloaded and also vary a lot in quality and work ethic. Our initial guy was very unreliable and actually wound up getting fired in the middle of our refinancing. So just make sure you stay on top of things in case they don't.
Oh, and if you're in a "jumbo" loan, see what it would take to get down to a conforming loan. That's also very worth it. Good luck!
Wonk is right that you want to really try to get out from under mortgage insurance if you can help it. Banks know that 80% LTV mortgages are extremely safe and you'll get the best possible treatment and rates during the process. (If all mortgages were 80% LTV, there would have certainly never been a housing crisis. Banks understand this.)
I'm a little surprised that the ARM is attractive to you. If rates increased sharply after 5 years, wouldn't this cause you some cash-flow trouble? You'd need to have a good ratio of available liquidity to the size of your mortgage to guard against that. Then again, 5 years of lower rates would give you time to nicely build your savings.
Once you start the refinancing process, stay on top of the loan document specialist \ manager person to make sure they keep things moving. They are sometimes overloaded and also vary a lot in quality and work ethic. Our initial guy was very unreliable and actually wound up getting fired in the middle of our refinancing. So just make sure you stay on top of things in case they don't.
Oh, and if you're in a "jumbo" loan, see what it would take to get down to a conforming loan. That's also very worth it. Good luck!
Re: Refinancing Your Mortgage
LW,
My liking of 5 Yr Arms (actually I like 7 or 10 better) lies with my speculation that rates will stay low... it'd be a risky play, to be sure, but would save me a nice chunk of interest in the interim.
Anybody ever start the process with 2 banks/brokerages to play them against each other once the rates/terms actually had to be decided?? Sometimes I get the feeling that they know they've got you between a rock and a hard place, and once you've mailed them every financial piece of info you've ever had they know you are more than ready to sign on the dotted line at a "fair" interest rate.
I'd like to sign 2 up for a GFE, maybe even pay for 2 appraisals (or more preferably arrange for one's appraisal to count for both brokers), give them both the same info, and when push comes to shove, basically start a bidding war.
I just don't trust the mortgage industry to give me a fair offer after going through a long pre-contract process that they know I won't want to repeat.
My liking of 5 Yr Arms (actually I like 7 or 10 better) lies with my speculation that rates will stay low... it'd be a risky play, to be sure, but would save me a nice chunk of interest in the interim.
Anybody ever start the process with 2 banks/brokerages to play them against each other once the rates/terms actually had to be decided?? Sometimes I get the feeling that they know they've got you between a rock and a hard place, and once you've mailed them every financial piece of info you've ever had they know you are more than ready to sign on the dotted line at a "fair" interest rate.
I'd like to sign 2 up for a GFE, maybe even pay for 2 appraisals (or more preferably arrange for one's appraisal to count for both brokers), give them both the same info, and when push comes to shove, basically start a bidding war.
I just don't trust the mortgage industry to give me a fair offer after going through a long pre-contract process that they know I won't want to repeat.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Refinancing Your Mortgage
Wells Fargo had a sort of streamlined "existing customers" refinance option. Maybe you can find something similar with whoever does your mortgage to get a starting point. IIRC this process was begun online and then after spending a few minutes on the phone with someone, I had a quote. It was of course not as binding as a GFE but it gives you a very good idea of what you can get with a very small time commitment.moda0306 wrote: Anybody ever start the process with 2 banks/brokerages to play them against each other once the rates/terms actually had to be decided?? Sometimes I get the feeling that they know they've got you between a rock and a hard place, and once you've mailed them every financial piece of info you've ever had they know you are more than ready to sign on the dotted line at a "fair" interest rate.
There's no need to get stuck between a rock and a hard place from my experience.
Re: Refinancing Your Mortgage
I have a mortgage guy I have used for many years and I trust him. When it comes time to buy or refinance I just call him. He knows I won't jerk him around so he gives me the best deal he's got right up front.
Building a relationship like this over time can be very beneficial (I've been working with my guy for 13 years). The mortgage people know all the games you are talking about and it shows up in the "retail" prices they advertise.
Building a relationship like this over time can be very beneficial (I've been working with my guy for 13 years). The mortgage people know all the games you are talking about and it shows up in the "retail" prices they advertise.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Refinancing Your Mortgage
MT,
What did you do to find this guy? Referrals?
Mine was an acquaintence, and I still felt like I was run through the ringer... moreso with financial disclosure late in the game than bad interest rate. This was also a purchase with 10% down, not a refi, so it made things more clumsy and difficult.
What did you do to find this guy? Referrals?
Mine was an acquaintence, and I still felt like I was run through the ringer... moreso with financial disclosure late in the game than bad interest rate. This was also a purchase with 10% down, not a refi, so it made things more clumsy and difficult.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: Refinancing Your Mortgage
The only reason I have stayed with him is that I don't run into any problems like you describe when dealing with him.moda0306 wrote: MT,
What did you do to find this guy? Referrals?
Mine was an acquaintence, and I still felt like I was run through the ringer... moreso with financial disclosure late in the game than bad interest rate. This was also a purchase with 10% down, not a refi, so it made things more clumsy and difficult.
I learned of him through a referral.
Also, when I call him he knows I'm not going to give him any trouble either (e.g., bailing on a locked rate, having credit problems, playing other brokers against him, etc.), which I think makes it easier for him to give me his best deal up front.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Refinancing Your Mortgage
Forgot to mention expected duration. How long do you see yourself living there? 30 years? I think the average move is 7yrs, but I doubt that's the median. I suspect the vast majority of people move in less than 5 years these days and the average is skewed by the folks who stay in a house 60 years.
If you expect to stay in the house long term, maybe a 20 or 30yr fixed is the way to go. If you see yourself moving in 10 years or less, perhaps a 7 or 10 year ARM would save some interest bps and allow you to get your principle down below 80%. The cost of 7yr money is currently less than the inflation rate, so it's a weird environment--but good for borrowers with a strong balance sheet and solid income levels.
Lone Wolf made mention of liquidity and that's an important factor. Being able to pay off a large chunk of principle if you need to is advantageous.
If you expect to stay in the house long term, maybe a 20 or 30yr fixed is the way to go. If you see yourself moving in 10 years or less, perhaps a 7 or 10 year ARM would save some interest bps and allow you to get your principle down below 80%. The cost of 7yr money is currently less than the inflation rate, so it's a weird environment--but good for borrowers with a strong balance sheet and solid income levels.
Lone Wolf made mention of liquidity and that's an important factor. Being able to pay off a large chunk of principle if you need to is advantageous.