Refinance Second Mortgage Question.
I posted a few weeks ago about problems we'd had trying to refinance
our 8.5% mortgage through a broker. He found us a 6.5% refinance deal,
bundled all the closing costs into the mortgage as we'd requested, told
us the payment would be about $50/month and a few years less than we
were paying, and showed up at closing with a mortgage that cost more
per month than we were already paying.
I went to my credit union yesterday to find out about refinancing
through them. Their best % for a 15 year mortgage is 6 5/8! I was
quite surprised. If we bundle the closing costs into the mortgage
(except for the taxes and insurance, which we would pay upfront), the
payment would be $28 less per month and about 2 1/2 years less (we have
about 17 1/2 years left on our mortgage, which is a 30-year mortgage).
However, if we are rejected for the loan or decide not to go through
with it, we would still have to pay all the loan fees. (I had declined
to sign a contract with the original mortgage broker that stated we
would have to pay fees if we rejected the loan. Instead, I crossed
through that part of the contract and we all initialed it. So we did
not end up having to pay the broker any fees.)
The credit union does not have a "no-fee" mortgage, in which a higher %
is charged in lieu of closing costs. Someone on this message board had
suggested that route.
Personally, I don't think it is worth trying to refinance our house
after talking to my credit union.
it's still $28 less a month, and over 15 years, that adds up to
$5,040. Then there's the two and a half years you'll be paying if you
don't refinance. I don't remember if you told us how much that was,
but it could easily be $20,000 I'd think. Still, that's 15 years down
the road, and a lot can happen in that time - like as not you'd never
see it.
I wouldn't give up yet though - there may be other alternatives. For
instance, we've done business with two banks for the last two and a
half decades. One was a savings and loan where we originally opened a
savings account, and another was a commercial bank we used for
checking (savings and loans didn't offer checking back then). Both
have been bought and merged and whatnot several times over the years,
but we're still there. Anyway, the bank where we have our checking
called the other day with an offer to refinance. The rate was 6.49%.
Not astoundingly great as things are right now, but still close to 3%
less than the rate on the first mortgage and around 2% less than the
second mortgage.
I have 12.5 years to go on the first, and 4.5 to go on the second.
Previous refinancing deals we'd discussed with various people involved
bundling the two together into a ten year new mortgage, with a
substantial drop in the monthly payment we pay today. However, we'd
be adding close to six years to the term of the second mortgage, and
when you look real close at the figures, we wouldn't even get the
closing costs back over the ten years. In other words, refinancing
would cost more, not less, than doing nothing, even though the
interest rate would drop substantially.
Anyway, as I said, the bank called offering refinancing, and what they
offered sounds good. As I said, 6.49%. No points. Total cost to get
the loan - all closing costs in other words - $75.00. No, that's not
a typo, sevnty-five bucks. And it would be structured as two loans,
so the clock wouldn't be reset on the second mortgage, while the first
would be for ten years, not the 12.5 I have at the moment. And the
total payment would drop by $50/month. And in about 4.5 years when
the second is paid off, it would drop by the whole amount of the
payment on the second mortgage, unlike the previous deals, where the
new payment would stay the same for the whole ten years.
It does exactly what I want - no (well, just a little) cash out of
pocket, no increase in term (in this case a decrease) and lower
payments. Payback would be a month and a half. I think I'm going to
take it.