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Time to refinance? How low can mortgage rates go? Reuters Blogs (blog)

12.08.11

Mark Sass and his wife Jan decided to refinance the mortgage on their Cincinnati, Ohio, home on Friday, just days before the Federal Reserve pledged to keep rates near historic lows through the first half of 2013.

“I knew the Fed statement was coming out and rates had dropped to historically low levels, and it just seemed like an opportune time. I hadn’t even thought about it until then,” says Sass, who owns his own marketing research company.

Their original mortgage had a 20-year amortization period — at a 4.875 percent rate — with 12 years remaining. They are rolling it over into a 10-year mortgage with a 3.5 percent rate. “I was able to knock a couple of years off the term with a very modest increase in the monthly payment,” Sass says. “It seemed like a no-brainer to me.”

Sass and his wife are both 55, so retirement is on the horizon. “The opportunity to look 10 years out and know that – unless things change – we won’t have a mortgage when we retire looked like a smart decision,” Sass says, adding the overall savings on interest by reducing his term will be in the neighborhood of $20,000.

Source:

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How much money do you have to pay for closing cost when you refinance home loan? ?

Dec 28, 2008 by k2 | Posted in Renting & Real Estate

I would like to refinance my house to get lower rate. My loan is 200,000. I m a first time homeowner, my current rate is 6.5 %. I ve own my home for about a couple of months, my credit is good, not excellent. I would like to know a ball park on paying closing cost. Also is the closing cost money i need to come up with?

2%

Alterfemego | Dec 28, 2008

if you have equity in your home the closing costs can be wrapped in the loan. if you don't the lender can-raise the rate so they cover closing costs with a higher rate.( fact is most loans have some yield spread added to them) as far as closing costs approx 2% is a fair amount some charge.

unfortunately the national average is 3 1/2 % closing costs

and yes all no closing cost loans are charging a Higher rate to use that yield spread to cover closing costs for you!
snelsonjd | Dec 28, 2008

What should a refinance loan cost?

Jun 02, 2007 by mary e | Posted in Renting & Real Estate

My credit union wants to charge me $5,654 in closing costs to refinance my house for $200k. The house is worth more. I'm shocked! What are all these fees--origination, underwriting, processing, administration, preparation and "loan discount" and should I pay them? Why do they want prepaid interest when it is in the payments? Why reserve 2 mos insurance? The "estimated settlement charges" are $8,365--is that excessive?? Thanks anyone for any help. If I carry it myself and my son makes payments to me (he lives in the house but can't get his own loan yet) can I get a home equity loan any cheaper?

Actually, for a $200k loan that sounds well below market. What I'd expect from a credit union.

The loan origination fee is typically 1% of the amount of the loan and is standard practice industry wide.

Underwriting, processing, administration, and preparation are common "junk fees" that you'll just have to live with for the most part. You can negotiate them in theory but most lenders are "take it or leave it."

Closing fee is mandatory, the closing agent has to get paid!

Titlle insurance is mandatory, at least the lender's coverage, and the borrower has to pay the premium. If you have a current title policy within the past 5 or so years they may accept that, however.

The loan discount fee is the points on the mortgage. It buys down the interest rate. You can negotiate this but if they are reduced or eliminated your interest rate will rise. A VERY rough rule of thumb is 1/2% discount fee reduces the interest rate by 1/8% - 1/4%. Once your rate lock expires the loan will float to market rates up or down.

Prepaid interest covers the interest on the loan from the closing date through the end of the month. This is because mortgage payments are paid in arrears, unlike rent which is paid in advance.

The 2 month reserve for insurance is deposited into your impound account with the lender. Part of your payment is advance payments on future insurance and property tax bills. Lenders are allowed a 2 month cusion over and above estimated expenses to cover for bills that are sometimes higher than estimated. Having an impound account is pretty standard but is not legally required. If you have very strong credit it's possible to get a loan without impounds -- my loan is like that, I manage my own property insurance and property taxes. If you self-manage the lender may require copies of the paid bills from time to time. If your lender agrees to drop the impound (if your credit is strong, by all means ask!) the estimated settlement charges will be lower as will the monthly payments.

A home equity loan is almost always more expensive than a conventional mortgage, at least as far as the interest rates go. Locally where I am, first mortgages are about 6.4% right now but a home equity loan is 7.5%. Home equity loans are very rarely fixed rate so the rate is subject to periodic adjustment, often as frequently as every month. The closing costs MIGHT be lower, you'll have to ask for a Good Faith Estimate to get some idea on that.

bostonianinmo | Jun 02, 2007

WIth it being a credit union I highly doubt they are trying to screw you.

All of those fees (execpt loan discount, I'll get to that later) are to pay various people involved in the loan process.

The loan discount is a fee you are paying upfront to lower your interest rate. Depending on how long you plan on keeping this house, this may or may not be a good deal.
Zzyzx | Jun 02, 2007

Even though it's YOUR Credit Union, you are not obligated to refinance through them. You should check other options and only go through with this deal if it is the best you can get. Most lenders don't charge discount points and yes, these closing costs seem excessive. I am sure though that there are details you are missing or simply don't understand. For example: Property tax escrow. Your credit union has to collect from you at the time of the closing several months of taxes but the same amount is already in escrow with your present lender and given back to you by them. That's a wash. Same with insurance, e.t.c. That can reduce your closing costs substantially. Also, a huge factor in all this is, WHAT INTEREST RATE you are getting for all this. Are you paying discount points for a lower rate? Is it worth to do so? It's more complex than you make it sound. Ask them more specific questions before you go for it. Good luck!
maria m | Jun 02, 2007

All of the fees that you listed in your question are going directly to your Credit Union. Should you pay them? It depends on what you are buying from them. Consider the interest rate that you are offered, and what kind of product, 30 year fixed, or adjustable.

Insurance? They are setting up an escrow account for you, so that your payment will include insurance (probably taxes as well). You can ask them if you can still get the same deal if you don't include taxes and insurance in your payment, or you can ask for only taxes to be included.

The final settlement charges of $8,365 may or may not be a bad deal, depending on what kind of interest your are getting and what type of product.

You can definitely get a home equity loan cheaper as far as closing costs are concerned, but rate will probably be higher, so you need to take in to consideration how long your are planning to keep that equity loan. If you think that you are going to keep it for a long time, the higher interest rate may become more expensive than the cost of refinancing.
Walter | Jun 02, 2007

Yes; I know several loan officers who could beat this. I recommend Smart Choice Mortgage. They do business in most states and are your best opportunity for someone to say yes. ADDITIONALLY, IF YOUR CREDIT IS SUSPECT, THEY SOMETIMES FRONT THE MONEY TO GET YOU INTO A CREDIT RESTORATION PROGRAM SO THAT YOU CAN QUALIFY FOR A LOAN. Check out the free evaluation form at the source website and a Smart Choice loan officer will contact you within 24 hours. Good luck.
stephen l | Jun 02, 2007

What is the average cost of closing on a home refinance loan and why is it so high? I being charged $6500!?

Jul 01, 2007 by curious | Posted in Renting & Real Estate

My credit rating is 581, is this why??

Closing costs vary greatly by lender. There are some that are fixed figures, but the rest is tied to the loan amount.

Shop around a bit, ask for a truth in lending good faith estimate of closing costs. And don't stop there. Ask about transaction fees, pre-payment penalties, late fees - anything that could also cost you money down the line.

Make sure you are comparing apples to apples before you sign on the line.

godged | Jul 02, 2007

An average figure would be meaningless. The cost depends on many factors, such as legal fees, stamps, title insurance, whether the loan includes points, prepayment penalty on the old loan, etc. You can ask for a complete breakdown of all costs before you sign anything. If any part is not clear, ask to have it clarified. Some items are required by law, some by the lender, and some may be optional. If the loan is for $50,000, the amount is too high. If it is for $500,000 it may be very reasonable.
Serge M | Jul 01, 2007

Most of the refinance charges vary with the size of the loan. There are a lot of people that have to get paid, and not all of the closing costs are really "costs".

You have the bank charges, and these can vary from zero to 2% of the loan.

Then you have "prepaid" items, including interest to the end of the month, and the amount they want to hold in the escrow account to pay your taxes and insurance when due; these can be several thousand dollars, but that's still your money, even after closing.

Then you have the attorney fees, including the title search and title insurance, and filing in the Land Records, and probably plus the cost for the closer to send the docs back in the overnight mail.

Your credit score impacts the loan availability and the interest rate, it doesn't impact the closing costs so much.
open4one | Jul 01, 2007

HAHA, your Lucky to even have a loan especially the way the market it is.
mtgguy | Jul 02, 2007

Should I refinance my condo? My friend loan officer says, no closing cost, is it possible?

Jul 29, 2006 by chicagoscene | Posted in Renting & Real Estate

He says he can take out the PMI and give me one month free, the second month he can add it to my loan. Is he going to add the closing cost to my loan also? How much does he make if he refienance my condo?

This guy is not your friend. You *NEVER* skip a month's payment. *Nobody* ever gives you even one day free interest. What happens is that it gets added to your balance, where you pay interest on it, and you have to pay it back eventually. If that's what you wanted, well and good. But that's not what he told you was going on.

I've done dozens of true zero cost loans. They do exist. But that doesn't mean that you're getting money that you would have to pay anyway paid. Monthly interest is something that you're going to pay every month as long as you have the loan. Just because there's no money out of your pocket doesn't mean it didn't cost you anything. I'm helping a client right now who was told the same thing you were. The previous loan officer charged him three points origination and got at least two more Yield Spread rebate from the lender, rolling all the costs into the loan.

Here are a articles I've written on the subject

http://www.searchlightcrusade.net/posts/1151621519.shtml

http://www.searchlightcrusade.net/posts/1137637391.shtml

http://www.searchlightcrusade.net/posts/1122472894.shtml

Searchlight Crusade | Jul 30, 2006

Anything is possible these days... Why do you want to refinance? If it will make a major difference in your payments, you may want to consider it, otherwise stay put. Your "friend" will be making a commission at your expense, regardless of the amount. You may be better off just to give your friend some money......
CMR2006 | Jul 29, 2006

unfortunitely your friend is out to make a living and loan officers can make it look like you are not paying closing costs when in fact you are paying the normal amount. Loan officers can make money on what is known as the back end. It is when he/she can negotiate a loan amount from a bank and sell you a loan at a higher rate. The bank will pay the loan officer the difference and you will not see it in the paperwork. be careful when you look at the papers because there is a difference between annual percentage rate and the interest rate.
rayce92 | Jul 29, 2006

No Closing Cost term it self is a false term. There are always closing cost because third parties like title company and recording fees are always charged. Unless the company is going to pay for them out of there pocket, which is unlikely than probably the term Closing Cost can be applyed. BUT,BUT this is if they dont charge a higher interest rate to cover the costs and/or they give you a higher loan amount in your Cash out refinance to cover it. What happens is you can get the closing costs refinanced from the equity in which you gained in the property. Yes the equity can pay for it. Good is that you pay no closing costs at the time but you just refianced it, so technicaly you are paying it monthly until you end the term of the note. If you take that to the 30 year term or note term you really did a job on yourself.

So No closing costs is term not used correctly in the RE Buisness. Just beware and always read your Good Faith Estimate or GFE.

http://www.mtgprofessor.com/ Learn more I did and do all the time.
Goldenbearloan.com | Jul 29, 2006

You know I am amazed at people that listen to the no closing cost and no out of pocket expense to you from loan people.

OK let's get a couple of things out of the way? Would you work for free for anyone friend or enemy? Well loan officers don't either. You will pay for the fees closing cost one way or the other.

If you are paying PMI now then it would be a good idea to refinance, eliminating that unnecessary fee that you can not deduct from your taxes.

Look at how much you are paying now, does the refinance reduce your monthly payments? Do you get a chance to pay off high interest credit cards or put money in the bank for necessary reserves?

Those are several reasons for refinancing, how they will help you.

Any cost incurred in a loan is tax deductible on sch A of your federal income tax, so that would not be a problem. Check with your tax preparer for any tax advice.

The fact that your friend is telling you that he can refinance you with a no closing cost loan without explaining to you how this is accomplished is something you ought to inquire of him.

The one month free is not really free, you have to pay the interest upon closing which normally have a lapse of about 20-35 days so your next payment is due 30 days later. What a friend you have.

I hope this has been of some use to you, good luck.

"FIGHT ON"
Skip | Jul 30, 2006

There are always closing costs, don't let anyone tell you different. They can be rolled into your loan so that there is no money out of pocket. The reason that you get one month free is because mortgages are paid in arrears as opposed to up front such as rent. So you would actually have that one month of interest rolled into your new loan. He doesn't sound like a very good friend. He's allowed to make up to 7.99% not that he will but, it's allowed. I'm a loan officer....if you have any additional concerns or questions. =)
Stacey B | Jul 30, 2006

Can a veteran get help with closing costs to refinance a home mortgage loan?

Jun 20, 2007 by N8 | Posted in Renting & Real Estate


Try this, Its good

http://mortgagerefinancingatlowrate.blogspot.com/

Nick | Jun 21, 2007

Yes, check out the hud.gov website. They should have links to your state and you can look for different loans and grants.
Tonya | Jun 20, 2007

Most of the closing costs can be rolled in to the new mortgage. You may have to come up with a few upfront dollars, but just tell your lender to roll in as much as they can.
Zuker | Jun 20, 2007

Yes on top of what has been told about gov websites, if you haven't used your VA loan assistance that you can get thru the VA you also have that to help you.
Icyelene R | Jun 20, 2007

Did you purchase the home using your VA certificate? If so, you should have had a decent interest rate to make refinancing unnecessary. Unless, you're refinancing to get money out.

Check with your current lender. They might be able to save you some closing costs. Also look at www.va.gov It'll redirect you to a loan section that is worth reading.
Miss V | Jun 20, 2007

The lender/broker can roll in your closing cost into the loan or do a no fee loan. No closing cost mean higher rate.
ron d | Jun 20, 2007

what would my closing costs be for a 415000 loan refinance?

Jun 20, 2008 by Mr Yankee | Posted in Renting & Real Estate

property is located in suffolk county, ny.
i am not paying any points.
i am not escrowing my property taxes or homeowners insurance.
I

it all depends on what bank you're getting your loan from so shop around.

slipperypickle | Jun 20, 2008

ask your lender for a total disclosure of all costs. typical costs might be called points, underwriting fees, processing fees, loan application fees. You'll also want to have your old title insurance policy handy; new lender will require title insurance and you'll save money if you can find your old policy. Generally speaking, you'll find loser costs refinancing with a local bank or savings institution rather than a mortgage brokerage.
Bob w | Jun 20, 2008

figure 1k for attorney and underwriting, probably more like 1500. I hate to do this to you but there are two big questions that need investigation/answers. One, have you looked into or are you already getting a re-issue rate on the title insurance. Depending on when your last transaction was, you could be eligible for this, this alone could save you 500-1000. Also, is this a straight refi or a con-mod? There is a DRASTIC difference here. Do you know the difference? For a straight refi, your probably looking at at least 3-5k in mortgage tax that your responsible for, a con mod would be much lower. The recording fee for the mortgage will be around 125-150, first page is 63 or 67 alone. Check on the re-issue rate, it is a law that you are entitled to this if you qualify, it may have already been granted, it may not have, you may have to produce the hud-1 from the most recent transaction, but definately look into, it could save you some big cash. Bottom line, closing costs for a straight refi could be between 7-9k as you get crushed on the mortgage tax. A con-mod would be lower as the mortgage tax is calculated on the new money amount, not the total loan amount, let me know if more info
Jeromy W | Jun 20, 2008

we figure approximately 3% of the price as a good guesstimate. They all vary.
sloopy | Jun 20, 2008

how much does it cost to refinance in closing costs?

Aug 26, 2008 by slov72 | Posted in Renting & Real Estate

My mortgage currently has my name, my wife's name and my father-in-laws name on it. I would like to know how much should it cost to refinance in oder to get only my father-in-laws name on the mortgage and title. It is an FHA loan with about 6.3% and 167000 outstanding.
does it make a difference if this would not be his primary residence?

Closing costs will vary depending on the location of the property.
Another factor is if any additional money will be put down towards the refinance or will any be taken out. The credit score of your father-in law will also be considered as well as the current value of the home? When i purchased my home closing costs amounted to about $6500.00 on a 107,000 purchase. Hope that helps:)

http://loan.yahoo.com/m/securing9a.html
http://www.countrywide.com/Calculators/calculator.aspx?CalcType=ClosingCostEstimator

babygirl69 | Aug 26, 2008

not too much as this is a streamline refi without an appraisal

I am a mortgage banker in TN & KY
golferwhoworks | Aug 26, 2008

Mortgage refinance of a property is quite hassle free and usually a good idea to save money.Borrowers who find it difficult to meet their repayment obligations due to financial constraints opt for refinancing their property. Refinance is also a preferable option for borrowers who want to lower down their interest rates even though they are able to make their payments comfortably. Mortgage refinancing involves replacing an existing mortgage with another one at a lower interest rate. Refinancing a property is a good option for homeowners who may have purchased property when interest rates were high.

http://mortgages-finance.awardspace.com/

http://best-loans.awardspace.com/homeloans.htm

There are various repayment options that can be chosen by borrowers and lenders mutually. Bi-weekly payments are one of the most popular payment plans among borrowers.Bi-weekly payments let borrowers pay off their mortgage refinance faster. Bi-weekly payments allow borrowers to pay their monthly installments in two parts to be paid twice a month. Instead of paying full amount once a month borrowers pay half of their scheduled monthly mortgage payment every two weeks. An advantage of this option is that borrowers repay an amount equal to thirteen monthly payments by the end of the year, instead of the usual twelve.
Zoe | Aug 26, 2008

every state have different closing costs . Ask your loan officer about those. If you don't have FHA loan - it will be not possible to refinance with your father in law only on the mortgage, because FHA loan only allow primary residence.
bianca | Aug 26, 2008

Will WAMU really refinance your home with no closing cost or is that a lie?

Nov 07, 2007 by Sam | Posted in Renting & Real Estate

I'm a loan officer and lately I've heard that Washington Mutual will do your home loan with no closing cost and the will use your old appraisal. Is this true or are there closing cost when it's all said and done?

they will use the old appraisal if it's a rate/term refi or if DU waives it.....streamline Refi

anyone can do NO CLOSING COSTS...if the going rate is 6.125% with closing costs....they will charge 6.75% no closing costs. they raise the rates by at least 0.5%

nothing in life is for free

Carolinahomerates.com | Nov 07, 2007

Is a no-fee no closing cost loan fair?

Dec 03, 2008 by attorneyinmichigan | Posted in Credit

The loan in question is a no money down 5.8% refinance where the broker is getting $14k in broker fees FROM the lender. Is this savings that should have been passed down to the consumer or is it a typical percentage paid to the mortgage broker?

A mortgage broker works on commission. This is paid by the lender. There is no part of this fee that belongs to the borrower.

A typical commission is 1% of the face amount of the loan, but it could be anything that the broker and the lender agree on.

It's just like buying a car. The price of the car is what the buyer agrees to pay and what the salesman gets in compensation is between him and the dealer.

Ted | Dec 03, 2008

Does these no closing cost refinance programs work ?

Jul 05, 2007 by genebean | Posted in Credit

200,000 loan reduce payments in half, apr 7.5%

The truth is there is no such thing as a no cost, no fee, no points loan...it's a sales tactic that works very well.

In reality, even when you get one of these programs, the mortgage broker or the bank loan officer must get paid somehow, and it's done through a rebate known as Yield Spread Premium.

In the US, mortgage brokers have to disclose this "hidden cost", but banks and direct lenders do not, and some will actually lie to you if you ask them about it, because by law they do not have to disclose it. The same is true for mortgage brokers who act as bankers just long enough to sell the loan.

A better way to deal with this is to pay your origination fees up front, which gives you the lowest APR and monthly payment possible under you specific scenario, because YSP/rebate costs you $100, $200, $300 per month depending on your property value, for the life of your loan, and the greed of the broker/loan officer. Not so bad if you don't plan to be there for a long time and you are being charged no more than 1 point, but wouldn't you like to know what the loan is actually costing you?

These loans with minimum payments can get you in deep trouble if you're not careful...you need to get educated on what a Pay Option Arm, or Hybrid ARM really means to you, and if you make the minimum payment, it always means you will have negative amortization, or simply put, you lose equity every month.

Work with a reputable lender in your local market, and ask them to disclose "ALL" costs associated with their loan offer to you...especially that hidden back end fee. If you are paying more than par for the loan, you are paying YSP.

My suggestion is always to have some down payment...at least 10%, but preferably 20%, but if you don't, don't buy a house with 100% financing in a troubled market, only in a fast appreciating market...and that's not where we are currently. You could be in big trouble if you combine 100% financing wth negative amortization in a flat to down market.

Be careful out there.

Robert Noakes
Real Estate Investment Consultant
Sr. Mortgage Planner
415.652.8112
robert@noakes.com

Robert N | Jul 05, 2007