Mortgage question

[finishthehat]

I searched but couldn't find anything on the board about this.

Chase has been FedExing out these letters to mortgage holders for a while, and I just got mine -- they will refinance me at no costs, dropping my interest rate from 5.5 to 5.13. I'm 10 years into a fixed-rate 30-yr mortgage, and the new rate would be fixed too. (I don't think we're underwater on the house; what we have left as a balance is probably pretty close to what it'd sell for in the current market.)

I hate financial crap, but did find an NY Times story from last year ( http://bucks.blogs.nytimes.com/2010/08/28/refinancing-a-mortgage-but-paying-it-off-early/ ) that seems to indicate they'd be trying to reset the new loan to 30 years, so in the long run you'd be paying more even if monthly payments are lowered.

FWIW, I intend to keep paying what I pay now each month even if the monthly payments are lowered.

Anyway, for the experts here: What do I need to know/ask/be wary about? (The decision has to be made by May 9.)

Thanks in advance.

 

[LongTimeListener]

Be wary about anything the banks offer you. They're doing it because they see something in it for them.

If you are 10 years into a 30-year mortgage that is not nearly enough of an interest rate drop to justify rolling it back out for 30 years. If you can afford the budget hit, your better option is to move into a 15 or even 10 year mortgage where you get a very nice interest rate and will save thousands upon thousands in interest over the life of the loan.

 

[Evil ... Thy name is Orville Redenbacher!!]

I searched but couldn't find anything on the board about this.

Chase has been FedExing out these letters to mortgage holders for a while, and I just got mine -- they will refinance me at no costs, dropping my interest rate from 5.5 to 5.13. I'm 10 years into a fixed-rate 30-yr mortgage, and the new rate would be fixed too. (I don't think we're underwater on the house; what we have left as a balance is probably pretty close to what it'd sell for in the current market.)

I hate financial crap, but did find an NY Times story from last year ( http://bucks.blogs.nytimes.com/2010/08/28/refinancing-a-mortgage-but-paying-it-off-early/ ) that seems to indicate they'd be trying to reset the new loan to 30 years, so in the long run you'd be paying more even if monthly payments are lowered.

FWIW, I intend to keep paying what I pay now each month even if the monthly payments are lowered.

Anyway, for the experts here: What do I need to know/ask/be wary about? (The decision has to be made by May 9.)

Thanks in advance.

We just signed the papers with Huntington bank last week to refinance. We also consolidated a second loan (from a roof job) into one payment.
Overall, we shaved a $100 bucks a month and six years off our mortgage.
Our refinanced rate was 5.4 or 5.3. We also were able to move our payment due date.
They were also running a special w/o closing costs. Initially it would have cost us $250.
I don't think we got a letter. We got a call and they guy said they typically prescreen potential customers before calling (Our loans were already through Huntington Mort. Co.). So they had a pretty good idea we would qualify for the terms and conditions of the loan.

 

[Pancamo]

Ask what the rate on 15 or 20 year mortgage would be if you refinance. A 15 year fixed should be almost a point lower.

The offer you received is for a 30 year loan and will payoff in 2042.

 

[maberger]

buddy of mine got the same offer from Wells Fargo last year. The key to this is no closing costs but mostly no prepayment penalties -- pay what you always have, apply the overage to the principal, and be done sooner.

taking five minutes to see what the 15 and 20 year refi deals are is probably worth it too, but surely those loans will come with re-org/closing costs, and maybe also new assessments -- likely requiring money out of your pocket

(although i just thought of this: you might want to check to insure the re-fi they are offering isn't reported to the credit bureaus as some kind of loan mod that affects your credit).

 

[finishthehat]

Yeah, I don't see the point in it all if it starts over as a 30-year mortgage.

 

[Baron Scicluna]

I'll echo what the others say on here. Look into a 15 or 20 year mortgage.

For years, I looked into refinancing, but all the banks ever would offer me were those flexible rate mortgages and ARMs. So I kept refusing.

Finally, after the whole mortgage mess, banks were willing to offer me a fixed rate again. I've been in my house 10 years, and went from a 30-year with a 7.5 rate to a 20 year with a 5.0 rate. We put all the closing costs in the mortgage, except for a $500 fee, and refinanced our credit card debt and home equity line of credit debt in it as well

I'm paying $135 more per month on the mortgage, but we're saving about $575 that we would have been paying for the other debts.

 

[BB Bobcat]

Be wary about anything the banks offer you. They're doing it because they see something in it for them.

Which makes them different from every other business on earth how?

Seriously, you have to decide if the immediate cash flow benefit is worth the long-term added interest. If you aren't going to be in this house in 20 years (when your current loan would be paid), don't worry about the long-term extra interest.

Simple as that.

 

[LongTimeListener]

Be wary about anything the banks offer you. They're doing it because they see something in it for them.

Which makes them different from every other business on earth how?

Seriously, you have to decide if the immediate cash flow benefit is worth the long-term added interest. If you aren't going to be in this house in 20 years (when your current loan would be paid), don't worry about the long-term extra interest.

Simple as that.

I don't believe I said they were different from any other business, although since you mention it I will point out that the mortgage industry's tactics in the last 10 years are breathtaking in their lack of scruples. I would trust a used car salesman more than i would trust a bank that was contacting me to offer a new loan. Also, since they're the biggest part of any of our monthly budgets, mortgage lenders deserve a ton more scrutiny from us, certainly more than a $100 coupon to clean your carpets.

The rest of your post is thinking like the banks want you to think -- Of course they will give you the chance to refinance. They always want people to be in the first 10 years of a loan, when the interest charges make up 70 to 90 percent of the payment.

 

[Pancamo]

Be wary about anything the banks offer you. They're doing it because they see something in it for them.

Which makes them different from every other business on earth how?

Seriously, you have to decide if the immediate cash flow benefit is worth the long-term added interest. If you aren't going to be in this house in 20 years (when your current loan would be paid), don't worry about the long-term extra interest.

Simple as that.

I don't believe I said they were different from any other business, although since you mention it I will point out that the mortgage industry's tactics in the last 10 years are breathtaking in their lack of scruples. I would trust a used car salesman more than i would trust a bank that was contacting me to offer a new loan. Also, since they're the biggest part of any of our monthly budgets, mortgage lenders deserve a ton more scrutiny from us, certainly more than a $100 coupon to clean your carpets.

The rest of your post is thinking like the banks want you to think -- Of course they will give you the chance to refinance. They always want people to be in the first 10 years of a loan, when the interest charges make up 70 to 90 percent of the payment.

The bank most likely isn't holding the loan. Chase will probably sell the loan and just service the account.

 

[trifectarich]

I would tell Chase it's got a deal provided it's willing to pick up where you are in your payment cycle (10 years in) and not reset it to 30 years. They'll say no, but it doesn't hurt to ask.

 

[BB Bobcat]

The rest of your post is thinking like the banks want you to think -- Of course they will give you the chance to refinance. They always want people to be in the first 10 years of a loan, when the interest charges make up 70 to 90 percent of the payment.

Agree. That's why I wouldn't plan on coninually refinancing but if you know you are going to move, that's different. You can't take a loan from house to house.