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Refinance mortgage 1 year after purchase?

Dr. J 25,043 3,353 June 2, 2011 at 04:39 PM
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Looking at interest rates, I've been thinking of refinancing (no cash out, just for a better rate) the home we purchased right around a year ago.

Pros - lower rate, theoretically. I believe our current rate is around 5.25%.
Cons - more BS to go through, and possibly fees. Our current mortgage is with BoA which is super convenient because I do all our other banking with them.

Our credit is excellent and we have 20+% equity, so no PMI. We didn't pay points the first go round. Would it be worth any upfront fees to look into this? Will it look fishy doing this "so soon" (relatively) after the first mortgage?

Again I'd be looking to refinance for the exact amount I owe, not cashing out anything.

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#2
Thats what we are doing if our damn purchase goes through. Looking at 6 months after we close though. To eliminate PMI and get better rate. I know we can get 0.5% lower on our interest and thats without shopping around.
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#3
Quote from Dr. J View Post :
Looking at interest rates, I've been thinking of refinancing (no cash out, just for a better rate) the home we purchased right around a year ago.

Pros - lower rate, theoretically. I believe our current rate is around 5.25%.
Cons - more BS to go through, and possibly fees. Our current mortgage is with BoA which is super convenient because I do all our other banking with them.

Our credit is excellent and we have 20+% equity, so no PMI. We didn't pay points the first go round. Would it be worth any upfront fees to look into this? Will it look fishy doing this "so soon" (relatively) after the first mortgage?

Again I'd be looking to refinance for the exact amount I owe, not cashing out anything.
Nothing wrong with this at all. First off, I'm sorry about your relationship with BOA Stick Out Tongue. BOA used to do some streamlined refi's on their own mortgages, would not hurt to inquire about them, they have less fees. Even if they don't do this anymore, it should be worth it to you to refi. I see no origination fee 30 yr fixed at 4.375%, a significant drop from where you are at. Is your loan a Fannie loan? Might be worth it to ask for the HARP program, so you don't have to pay for an appraisal.


Quote from Scampsters View Post :
Thats what we are doing if our damn purchase goes through. Looking at 6 months after we close though. To eliminate PMI and get better rate. I know we can get 0.5% lower on our interest and thats without shopping around.
Most conventional loans require 12 months on title to do a refi.
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#4
i have a wells fargo loan and am unable to do a streamline refinance because i got married, my wife's name changed and i assume we need a title change.
can i change the title myself and then have access to the streamline program or do i have to do a traditional refinance?
i am 2 years into a 30yr mortgage at 5% 157k mortgage 118k left
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#5
Just depends on what the costs are and what the savings will be. After a year, you'd need a relatively larger loan amount to make a big enough difference to make it worth it. At $200,000, you'd save about $100/month dropping from 5.25% to 4.375% and if there are costs included it would reduce your savings.

As far as HARP, if your loan is only one year, you won't be eligible for HARP. Also, you'd only need to be on title for 6 months to do a rate and term refinance. 12 months for a cash out refi or to use your appraised value.

If I were in your position, I'd look at reducing your term. Look at a 20 year or a 15 year. If you can afford it then definitely take advantage of the low rates.

And Scampsters; If you think you are going to be able to use your appraised value after 6 months, the guy/girl you are working with is blowing smoke. You're purchasing with a 203K. They base your loan-to-value on the after improved value of the home. Six months down the road, you go to refinance OUT of your 203K FHA loan into a conventional loan, THEY WILL USE YOUR PURCHASE PRICE to determine your loan to value. And if you try to do a FHA refinance, you'll still have mortgage insurance (assuming it's a 30 year mortgage.) You're purchasing the home for $100,000 and after the improvements, your value is $110,000. Six months down the road, your value is $115,000 but your purchase price was $100,000. You will not get rid of your Mortgage Insurance. Seriously. If you believe otherwise you are setting yourself up for a major disappointment.

Silenze; that's not a problem. Just call Wells and ask them if you're eligible for the 3-Step Refi (their version of the streamline.) If you are, I'd definitely look and see what your options are for reducing your term to a 20 or 15 year for free.
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#6
Quote from General Ghoul View Post :
Nothing wrong with this at all. First off, I'm sorry about your relationship with BOA Stick Out Tongue. BOA used to do some streamlined refi's on their own mortgages, would not hurt to inquire about them, they have less fees. Even if they don't do this anymore, it should be worth it to you to refi. I see no origination fee 30 yr fixed at 4.375%, a significant drop from where you are at. Is your loan a Fannie loan? Might be worth it to ask for the HARP program, so you don't have to pay for an appraisal.




Most conventional loans require 12 months on title to do a refi.
It's conventional. I believe there's around $290+k on it. Payment history has been straightforward, I've even paid more into it every month than the requirement (I rounded up to the nearest $100). The BoA relationship is nice because the mortgage info is all in the same place as all my other banking stuff, and if I want to pay more/adjust the payment, it's just changing the automatic transfer.
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Quote from Boomancini View Post :
Just depends on what the costs are and what the savings will be. After a year, you'd need a relatively larger loan amount to make a big enough difference to make it worth it. At $200,000, you'd save about $100/month dropping from 5.25% to 4.375% and if there are costs included it would reduce your savings.

As far as HARP, if your loan is only one year, you won't be eligible for HARP. Also, you'd only need to be on title for 6 months to do a rate and term refinance. 12 months for a cash out refi or to use your appraised value.

If I were in your position, I'd look at reducing your term. Look at a 20 year or a 15 year. If you can afford it then definitely take advantage of the low rates.

And Scampsters; If you think you are going to be able to use your appraised value after 6 months, the guy/girl you are working with is blowing smoke. You're purchasing with a 203K. They base your loan-to-value on the after improved value of the home. Six months down the road, you go to refinance OUT of your 203K FHA loan into a conventional loan, THEY WILL USE YOUR PURCHASE PRICE to determine your loan to value. And if you try to do a FHA refinance, you'll still have mortgage insurance (assuming it's a 30 year mortgage.) You're purchasing the home for $100,000 and after the improvements, your value is $110,000. Six months down the road, your value is $115,000 but your purchase price was $100,000. You will not get rid of your Mortgage Insurance. Seriously. If you believe otherwise you are setting yourself up for a major disappointment.

Silenze; that's not a problem. Just call Wells and ask them if you're eligible for the 3-Step Refi (their version of the streamline.) If you are, I'd definitely look and see what your options are for reducing your term to a 20 or 15 year for free.
A lower term would help the rate for sure - with my last place we went for a 15 vs 30 yr because of the rate but also the REQUIRED payments were reasonable for our income. Here, the payments are significantly more, and going to a 20 or 15 would increase them dramatically. I'm willing to sacrifice a slightly higher rate for flexibility in payment. In a 30 year term there's nothing preventing me from making the 15 year term payments, but the opposite is not true.
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Quote from General Ghoul View Post :
Nothing wrong with this at all. First off, I'm sorry about your relationship with BOA Stick Out Tongue. BOA used to do some streamlined refi's on their own mortgages, would not hurt to inquire about them, they have less fees. Even if they don't do this anymore, it should be worth it to you to refi. I see no origination fee 30 yr fixed at 4.375%, a significant drop from where you are at. Is your loan a Fannie loan? Might be worth it to ask for the HARP program, so you don't have to pay for an appraisal.




Most conventional loans require 12 months on title to do a refi.
Is a 203k considered conventional ?
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Quote from Boomancini View Post :
Just depends on what the costs are and what the savings will be. After a year, you'd need a relatively larger loan amount to make a big enough difference to make it worth it. At $200,000, you'd save about $100/month dropping from 5.25% to 4.375% and if there are costs included it would reduce your savings.

As far as HARP, if your loan is only one year, you won't be eligible for HARP. Also, you'd only need to be on title for 6 months to do a rate and term refinance. 12 months for a cash out refi or to use your appraised value.

If I were in your position, I'd look at reducing your term. Look at a 20 year or a 15 year. If you can afford it then definitely take advantage of the low rates.

And Scampsters; If you think you are going to be able to use your appraised value after 6 months, the guy/girl you are working with is blowing smoke. You're purchasing with a 203K. They base your loan-to-value on the after improved value of the home. Six months down the road, you go to refinance OUT of your 203K FHA loan into a conventional loan, THEY WILL USE YOUR PURCHASE PRICE to determine your loan to value. And if you try to do a FHA refinance, you'll still have mortgage insurance (assuming it's a 30 year mortgage.) You're purchasing the home for $100,000 and after the improvements, your value is $110,000. Six months down the road, your value is $115,000 but your purchase price was $100,000. You will not get rid of your Mortgage Insurance. Seriously. If you believe otherwise you are setting yourself up for a major disappointment.

.
Purchase price will be 90k and the initial lender done based appraisal was 185 which is about $5000 more than the amount we are gettinng loaned. From what they used as comparitive house prices the property around here is $220k and doesnt have the nice double lot we are on or the brand new 2 car garage we are having built and the landscaping. If our place doesnt reappraise for the the $220k id be really suprised.

They intially appraise it lower for the lenders benefit but not lower than what the lent amount is. So they low balled the value to fit in with loan amount. If the appraiser had come back and said the house was worth 120k the lender sure as hell wouldnt have given us 180k.
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#10
I am in the same situation as the OP and have been looking at it for a while especially when rates were cheaper. Fees are what kept me where I was for the time being. It was looking like it was going to cost $1500 to refi for about 1% difference. I have heard that once you can save a 1% or more its worth it.

To the OP what are you seeing rates and fees at?
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Quote from LiquidRetro View Post :
I am in the same situation as the OP and have been looking at it for a while especially when rates were cheaper. Fees are what kept me where I was for the time being. It was looking like it was going to cost $1500 to refi for about 1% difference. I have heard that once you can save a 1% or more its worth it.

To the OP what are you seeing rates and fees at?
I haven't really looked. I hear rates tossed around all the time, though. I don't think your 1% benchmark is accurate, as it really depends on how much you will take out assuming the same term.

For example, if I run the amortization for my place @ $300k outstanding (easy numbers), lowering from 5.25 to 4.25%, making the same payment I am now (which is slightly overpaid) will result in a $98k (yes K) savings over the life of the loan. If I just make minimum payments on both, the difference is $65k.

Either way, closing costs will only be in the single digit $k's so the refi would be well worth it.

I figured I'd ask the question before "looking" although I guess I can drop by a branch today and ask them. No harm in that.
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Quote from Dr. J View Post :
I haven't really looked. I hear rates tossed around all the time, though. I don't think your 1% benchmark is accurate, as it really depends on how much you will take out assuming the same term.

For example, if I run the amortization for my place @ $300k outstanding (easy numbers), lowering from 5.25 to 4.25%, making the same payment I am now (which is slightly overpaid) will result in a $98k (yes K) savings over the life of the loan. If I just make minimum payments on both, the difference is $65k.

Either way, closing costs will only be in the single digit $k's so the refi would be well worth it.

I figured I'd ask the question before "looking" although I guess I can drop by a branch today and ask them. No harm in that.
Ya this is assuming you will be there for the life of the lone. I am betting I wont be. Not sure when or if I will leave so I am a bit more hesitant. If closing costs are low enough I think it would be worth it. Rates are low enough again that its worth probably looking into again. It was just such a process the first time I hate to do it again. Smilie
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OK just got back from BoA. I spoke with their loan officer over the phone (he's a shared asset between a couple branches).

He said they could give me 4.5% with around $1100 in closing costs, plus my atty fees. He also said that since my existing mortgage is with BoA, the process would be simplified and they likely wouldn't have to reassess (additional $$). He said to plan on $1400 in closing from my atty (which I think is higher than what he charged the first go round, but for planning purposes...), bringing total closing up to $2500 with no points. [our atty would need to redo title insurance, and also do a title check for liens, etc etc]

It may not be proper to assume we'll be there for 30 years, you're right (and I don't anticipate being there that long). If I just compare payments and see how long the closing costs would take to pay for themselves, right now I have around $297k on the mortgage with a $1665 PI payment. At the 4.5% and rolling in the closing costs (which he said could be done, meaning no OOP for me for this), bringing the mortgage back up to about $300k, the PI payment would be $1520. The difference is around $145 a month meaning it would take around 17 months for the transaction to pay for itself.

He gave me slightly different numbers on the phone, but again we're estimating so he said 12-15 months for payoff, which isn't far off my 17 months estimation.

We DO plan on being there for at least another 5 years or so.

Using a handy dandy amortization XLS sheet, the scenarios look like this - after 5 years (from now):
[The "Accelerated payment" assumes that I keep the payment amount the same as I do now and don't change it to account for the reduction in the required payment, which is the avenue I'd choose]

Current mortgage, $297k, 29 years, 5.25%
Standard payment ($1664) Interest paid: $74.4k, Principal paid: $24.9k, Outstanding balance: $272k
Accelerated payment ($1754) Interest paid: $74.1k, Principal paid: $31.1k, Outstanding balance: $265.9k

New mortgage, $300k, 30 years, 4.5%
Standard payment ($1520) Interest paid: $64.7k, Principal paid: $26.5k, Outstanding balance: $273.5k
Accelerated payment ($1754) Interest paid: $63k, Principal paid: $42.2k, Outstanding balance: $257.8k

Differences (Current-New):
Standard payment ($143) Interest paid: $10.2k, Principal paid: -$1.6k, Outstanding balance: -$1.5k
Accelerated payment ($0) Interest paid: $11.1k, Principal paid: -$11.1k, Outstanding balance: $8.1k

SO THE BOTTOM LINE IS by refinancing with this offer, I'd save $11.1k in interest (which goes directly to principal) meaning if I sell after 5 years the outstanding balance on the mortgage will be $8.1k less.

I guess the one thing to do now is to find a better rate - how low is realistic?

Also - is it true what he said - if I go with another lender they may have to reassess?
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Last edited by Dr. J June 3, 2011 at 10:17 AM
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#14
If your questioning their honesty and integrity in what they told you is it people you really want to be paying money to Wink
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#15
when we refinanced (different lender) they reaccessed the value, they came by and did a home inspection took pictures walked around the property. Im not sure why you (the bank probably would) would need to redo the title insurance or title search, but each state is different. Our title insurance was good for the life of the title regardless of who the loan was through. Each state is different there though.
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