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24 March 2006 @ 09:19 am
Dear lazyweb  
I know there's some other homeowners out there.

I bought my house less than a year ago, and the past few months I've been getting refinance offers in the mail. Lots of refinance offers. Some of them claim to cut my monthly payments by more than 50%, while offering a lower APR. Others claim a ridiculously low "introductory" interest rate, but a fairly high APR. Those latter ones make me feel a bit more comfortable, because there I can SEE the scam angle.

Somewhere, I got the idea that you shouldn't refinance too often, but I don't remember why. I'm sure these mortgage companies aren't doing this out of the goodness of their hearts, so I'm trying to figure out what the "rape me now" angle is to all of this.

Of course, it's possible that the house has gained significant value in the past year, with how stupid the Seattle housing market has been. Is there any legitimacy to the claim that I should "consolidate and refinance now!"? Should I just call Matt Scau and prepare for a few months of mortgage paperwork?

How often should I expect to do this? Is refinancing just one of those things a homeowner should plan on doing every few years?

UPDATE:
Of course, I won't be refinancing with any of the people that are spamming me with these letters.

Thank you, the lazyweb rocks!
 
 
 
TW Bruhn: Mathphobicapestyle on March 24th, 2006 05:30 pm (UTC)
Is ofthewoods still doing that?

...your questions make me think I should do some research too.
Turning the Schmaltz up to 11pullthestars on March 24th, 2006 05:38 pm (UTC)
Here's the number for my parents' real estate guy:
(425) 466-7355
Bill Molloy (he's with John L. Scott)

I'd check with him on the viability of refinancing this soon. Something makes me think it might not be a good thing, but I know next-to-nothing about real estate.
St. Sean the Amusedseanb on March 24th, 2006 05:52 pm (UTC)
Right. It "feels" early, but I want to know why, and not make decisions about this kind of money based on intuition.
eggiebert on March 24th, 2006 05:38 pm (UTC)
The hard thing with refinancing when we bought our house was origination fees on the loan. They can total some thousand dollars, (2-4 in our case) and if youre not going to recoup that savings in the next couple years by your reduced payment, then they possibly havn't lowered interest rates significantly enough to make a difference, just a new loan and no significant benefit.

I found refinancing to be easier than buying the house, and certainly took less time. I think that was largely in part to the person we'd done our refinance through (no longer in business, unfortunately) makeing it clear how the new loan would improve our payment.

We had an FHA loan so we had the oportunety to go from FHAloan payment + mortgage insurance, to standard loan + (o). And we were so broke at the time we did our refinancing that the payment was the only thing that mattered, any ammount less was great!

Um. I'd chat with Matt. :D
Fireball of 3: Cthulhu plushiefireballof3 on March 24th, 2006 05:44 pm (UTC)
we recently refinanced our house, and here's the reasons why:

Our interest rate sucked ass AND was variable

Our house had almost doubled in value since we first bought it, and refinancing would allow us to pay off some other high interest debt (credit cards)

It was a good opportunity for us to change insurance companies

We had a much better credit score after having our house for a few years than we did when we first bought our place


Now as a side note, we JUST refinanced and we still get a constant flood of "great offers" from mortgage companies.

Really, if you're not happy with your interest rate (it should be fixed and somewhere around 7% or less), if you're not happy with your loan terms (prepayment penalties are stupid), or if you HATE your mortgage company, then it would be worth your time. If not, then don't worry about it and invest in a shredder.

And the angle for them - it's the fees they charge you to refinance. They ended up charging us about $3000 in fees when we did it, but it was still worth it.
St. Sean the Amusedseanb on March 24th, 2006 05:50 pm (UTC)
Ah, yes. The thousands of dollars in fees would probably be their primary motivation, especially if they can sucker me into a loan that doesn't cost them any more in the long run.
Fireball of 3fireballof3 on March 24th, 2006 06:01 pm (UTC)
If you need a large infusion of cash or a lower interest rate for some reason, then it can be worth it.

If not, then you would do better just pay off your loan early and flip the mortgage companies the bird.
Fireball of 3fireballof3 on March 24th, 2006 05:45 pm (UTC)
Oh, and Since I don't know if Matt does that anymore, you coudl also talk to Jenga, as I think she's doing this sort of thing too...
Jimwarpdragon on March 24th, 2006 05:49 pm (UTC)
Given that rates haven't really dropped since you purchased, I wouldn't do it quite yet. The increase in value would only help you if you wanted to draw cash out of your equity, I think; if you're just looking at saving money on interest, there should be no real point in refinancing.

Oh, and every time you refinance, they get their fees. And they want you to give your interest to them, not whoever you're paying it to now.

So in my mostly uninformed opinion, you should do with them what I do with all the credit-card offers that come for my already-drowning ass: dump 'em in the trash.
Wolfladypuppygrrl on March 24th, 2006 10:09 pm (UTC)
Re: credit card offers. DON'T dump them in the trash. YOu really want to burn/shred/mangle/destroy them in some way, particularly the "pre-approved" ones. If you don't that opens you up to ID theft. Actually that goes for refi stuff too.
Stupendous Manfarmalloc on March 24th, 2006 06:17 pm (UTC)
You don't want to refinace often becuase you have to repay all that crap you did at the beginning...Loan fees, closing costs etc. This time they just add it to the loan so you don't actually pay anything but it 10000 more on the loan you have to pay eventually.

That said I am probably going to refinace this summer. Because being a first time homeonwer with a 0 down I got a real shitty HELOC. Now that I have some equity in the house and have "proven" to be a good home owner it opens the doors to new possibilties of loans. So I will do it. But after that I probably won't refinacne again for several years. Unless there is a real advantange to it that will outweigh adding more closing costs to the loan.
St. Sean the Amusedseanb on March 24th, 2006 06:23 pm (UTC)
That's really the only reason I'm tempted, too. I also did the 0-down thing, and I'd like to consolidate both the mortgages to an interest rate equal to or lower than the lower rate I am currently paying.
Stupendous Manfarmalloc on March 24th, 2006 06:41 pm (UTC)
Yeah not a bad plan...but I wouldn't use any of thouse refinacing things you get in the mail. I think they are all skecthy. My mortgage borker said he was going to consolidate them into one loan that would be better. So I suggest talking to a mortgage broker. I can give you the name of mine if you are interested. I don't know if I like him or not...as I never really played the field, but he was an aquaintance of a friend so I gave him a shot. He seems pretty on the ball.
Zzyzx: hausthezzyzx on March 24th, 2006 06:44 pm (UTC)
I refinanced pretty early because I was able to turn an 80/20 into a single mortgage and saved $350 a month.

In terms of the prices they quote, I bet a lot of them are interest only loans (the ones I get are) and their bet is that you won't pay anything on top of that (that might even be prohibited) so you'll pay them money but gain no equity, keeping you in debt forever.
Zzyzx: hausthezzyzx on March 24th, 2006 06:46 pm (UTC)
Oh and if you want to refinance, my broker is a close friend and I'd trust him with anything. I wouldn't have been able to buy a house without him.
Wolfladypuppygrrl on March 24th, 2006 10:14 pm (UTC)
We'll probably be refinancing at the end of next year. Our loan is a three year fixed then ARM. I'd like to refi so we get a fixed rate and don't have to deal with the ARM, particularly since interest rates are predicted to start rising (though with the housing market slowing it's anybody's guess).

If you want to get fewer of the spammy things, I've got a post a ways back (I think it was my last public post) that tells how to get off all those lists. I don't get the refi crap anymore since I did so.