Home Refinancing

[CrimsonMaiden]

We're looking into refinancing our house, the kind where you get money added to the loan so you can pay off debt. If your credit is less than stellar, how many points should you expect to have to pay to get a decent interest rate?

We've got an offer in the works, but it almost sounds too good to be true.

 

[jomar]

Don't know. All I can say is read the fine print, carefully. I just refinanced. Originally thinking 30 years so got the good faith estimate that had me getting back a dollar. Switched to a 15 year fixed loan (since retirement in on the horizon) and didn't get a good faith estimate since things moved fast. I got to the closing and all of a sudden I owed $2600! Turns out that the credit report underestimated how much I owed for the actual mortgage payoff (still don't get that) and there were additional taxes that were underestimated. Left a bad taste - if the broker had only said, "Hey, it could be more" I'd've been prepared.

By the way, she had a sign in her office I liked: "Friends don't let friends take out 30 year fixed loans." If you can do anything to build equity as fast as possible instead of pay tons of interest, do it.

 

[Goldie Munro]

Be careful! Some re-financing loans are a real con - I just put some more onto my mortage with the building society - it was easy!

 

[CrimsonMaiden]

Be careful! Some re-financing loans are a real con - I just put some more onto my mortage with the building society - it was easy!

I'm not sure I understand what you are talking about.

 

[Goldie Munro]

I'm not sure I understand what you are talking about.

Are you from Uk or US it will probably make a difference!

 

[jomar]

If you have a good rate, etc on your current mortgage, if you haven't already, consider a second mortgage to pay off your debt.

 

[SlickTony]

Credit ratings for both of us are in the mid-600s, and we've locked it in at 6.5%, which is about 2 points better than our previous refi. The refi is being handled by one of my husband's best friends. We were supposed to have closed today, but the lending company is being unbelieveably fussy about our employment verification--despite the fact that they called the administrative assistant, who's our HR person and got it verified that I worked there, I still had to fax over my last pay stub. And his verification didn't get in on time. We're supposed to close Monday, though.

 

[CrimsonMaiden]

If you have a good rate, etc on your current mortgage, if you haven't already, consider a second mortgage to pay off your debt.

Our first rate wasn't very good. Our credit was atrocious then.

Credit ratings for both of us are in the mid-600s, and we've locked it in at 6.5%, which is about 2 points better than our previous refi. The refi is being handled by one of my husband's best friends. We were supposed to have closed today, but the lending company is being unbelieveably fussy about our employment verification--despite the fact that they called the administrative assistant, who's our HR person and got it verified that I worked there, I still had to fax over my last pay stub. And his verification didn't get in on time. We're supposed to close Monday, though.

Our rate isn't quite that good but the refi is being done by using the house as the asset. It's the only way because our income isn't that great at the moment.

 

[SlickTony]

Actually, for a long time, ours was in the toilet--both credit rating and income. I only saw my rating for the first time the other day. Hitherto, I hadn't really wanted to know.

 

[MaeveoSliabh]

Having worked for a mortgage company, i can say a couple of things.

First: DO NOT get an adjustable rate or balloon. Period. If that's what they offer you, refuse it. Even if the interest rate is a little higher, it's worthwhile to get a fixed rate mortgage.

Second: Read and make sure you understand all of the fine print before signing anything. If there's anything that you don't understand and feel comfortable in doing so, drop me a PM with the exact wording in it and i'll do what i can to explain it.

Third: Do everything you can to pay a little extra per month. When you can, and do, make sure to note on the check you send in that the extra payment is to go to principal. Call a couple of weeks after sending it in and make sure it goes to the principal. EVERY TIME. If you have an automatic draft set up to pay your mortgage, if you can, call the mortgage company and have them take out a little bit extra to go toward principal. Even an extra ten or twenty bucks a month can take a few payments off of the mortgage and will save you literally hundreds of dollars worth of interest - but those payments have to be made to the principal balance for them to do much good.

There are a couple of other things floating around in the ol' brain, but it's nearly 4 am here and i haven't been to bed yet. They're not clicking.

 

[SlickTony]

And if you don't have extra paid into principal, put it in escrow. Out of your escrow account comes things like payments for homeowner insurance and property taxes.

In '83, we bought this house in Texas. It was a nice place--3BR, 2B, double garage, fireplace, cathedral ceiling. It was also 5 minutes walk from Galveston Bay, and the subdivision had its own private T-head fishing pier and a small boat pier. When you bought, they gave you a key to the gate onthe pier. Of course we had no business buying when interest rates were 15%, but we had been living in an apartment with NO NATURAL LIGHTING downstairs, and I found the subdivision whilst looking for better rental properties, and I fell in love with the place. The title was duly searched, and we signed a regular, fixed-rate mortgage, with the payments set at $767.

About a year later, all of a sudden, the payments jumped up by about $400, and no one would explain to us why. After many letters and phone calls, it came out that the property taxes had been figured up wrong. They had been figured on the basis of the lot, not the lot with a house on it. The property tax--the real property tax--eventually ate up the escrow, and that's when the payments went up. There was an admission of error, of the smarmy Bush Administration type--"a mistake was made"--but they wouldn't put our note back like it was. We ended up paying $200 above the payment we'd signed up for in good faith. I'd never have bought if I'd known the payments were going to be upwards of $1000.

So when we bought our house in '99, I made extra payments, but usually into the escrow account.

 

[cloudy]

If you can, pay half a house payment every two weeks, starting with two weeks before a payment is due, of course, so it won't ever be late.

The result of this will be one extra house payment a year, but even more importantly, the cumulative effect of paying half of it early (and then earlier and earlier, due to the extra payment/year), is (are you ready for this?):

You'll pay a thirty year mortgage off in 11 1/2 years.