Refinancing my house questions

[The Old Jaybird]

I did one refi in my life.

I went from 24 years left on a 30 year mortgage at $900/month, to a new 15 year mortgage at $850/month. No fees up front, application fee, etc. just sign my name on the new paperwork.

So where did I mess up??

 

[DADI03]

I did one refi in my life.

I went from 24 years left on a 30 year mortgage at $900/month, to a new 15 year mortgage at $850/month. No fees up front, application fee, etc. just sign my name on the new paperwork.

So where did I mess up??

Sounds like it went well for you. You probably had a large interest reduction to reduce it that much.

 

[GeauxLSU]

I did one refi in my life.

I went from 24 years left on a 30 year mortgage at $900/month, to a new 15 year mortgage at $850/month. No fees up front, application fee, etc. just sign my name on the new paperwork.

So where did I mess up??

lol, no way to know if you 'messed up'. If you got the best APR available at the time, you did well.

 

[GeauxLSU]

The most important thing IMO people should do is set a time horizon for when they want to be mortgage free and STICK TO IT. Doesn't matter if you refi, move to a new home, whatever. Always pay on a schedule that will allow you to make your last payment at the time you set as a goal. It's way too easy for some folks to get sucked into the "We can refi you into a 30 year and lower your payment. Don't worry you wont' be in that home 30 years anyway" trap. Of course they are the same ones that don't care what a new car costs, only "How much is my payment going to be?"

 

[WallsGa]

So, like the title says, I am thinking of refinancing my house. My current interest rate is 4% and my credit score is right around 800. The mortgage broker gave me a quote of 3% on a 25 year loan and an origination fee of $1,560 on the approximate $105,000 left on my current mortgage.

The broker said that the first two months would not have a payment due, but that one of those months' payments would be moved to the end of the loan. She made it sound like the other payment essentially seems to disappear and that my net cost of the refinance would be around $800. But I know that money does not just disappear, nor is it free. Can anyone help me figure out what is really going on?

Also, for any of you that have refinanced recently, what type of rate were you able to receive?

Thanks.

Jake - this is the guy I mentioned in the pM : HKMurkure

 

[HKMurkure]

REVISED RESPONSE BELOW

Here are examples from my mortgage software system. Please review as a picture is worth a thousand words.

Prepaying principal DOES lower your overall Interest Charges on a Simple Interest Mortgage. It DOES NOT reduce your monthly payment obligation. You will always have the same mortgage payment UNLESS you request the loan servicer to RECAST your loan (usually a fee is charged), which they will recalculate your payment based on original interest rate and term.

Adding extra payments will not make the loan re-amortize, it will pay the loan principal down quicker, and the total number of payments will be reduced.

 

[Cruisers460]

Y'all making me feel bad, about to buy at 5%. Due to already owning a couple of houses and not planning on moving into this one for a few years plus house to land ratio I'm stuck with a farm or investment property loan till I sell one of my houses.

 

[GeauxLSU]

What is described in this quite is correct if you had a SIMPLE INTEREST loan. The OP was referencing a fixed mortgage which has a fixed amortization schedule. The interest charged every month on a fixed mortgage is predetermined at the start of your loan term, regardless of additional principal payments. The only time you can take advantage of principal payments to lower your interest during your fixed term is to request the servicer "recast" your loan. There is usually a cost associated to this request and it can be very beneficial if you make significant principal payments, etc.

Absolutely (for a true simple interest loan). Part of the reason I mentioned no pre-payment above. I've never thought about it but what percentage of mortgages do you write (I assume you're in the business) do NOT allow pre-payments to apply to the principle and affect the interest calculation? I could be mistaken, but I think the only one I had was my first, since I distinctly remember having to make sure they at least allowed the one (and it was only one) time re-amortization I knew I was going to need. I needed it since I knew in short order I was going to pay it down to reach my 20% equity and get my PMI relieved.

 

[GeauxLSU]

Y'all making me feel bad, about to buy at 5%. Due to already owning a couple of houses and not planning on moving into this one for a few years plus house to land ratio I'm stuck with a farm or investment property loan till I sell one of my houses.

5% farm/land loan seems cheap to me!

 

[HKMurkure]

When comparing closing cost, please understand that there are a number of factors at play.

1. Lender/Broker Compensation. We do not do this for free, as this is our livelihood. Brokers cannot hide how much they make, so just ask. Correspondent and Direct lenders can hide, rename or not disclose how much they are making. Get quotes, as these can vary significantly between lenders/brokers.
2. Appraisal Fee - Usually required but we are experiencing a high volume of Appraisal Waivers currently. Same no matter who you use.
3. Closing Attorney Fees - GA is an Attorney State. They charge to represent the lender and not you. Lenders Title Insurance, Closing Fee, Settlement Fee, Courier Fees, Search Fees and Closing Protection Fees are customary. Ask your lender to shop for Attorneys with the lowest fees as they can vary greatly.
3a. Owners Title Insurance is only applicable to purchases.
4. Recording Fees to the State/County - Same no matter who you use.
5. GA Mtg Tax - Same no matter who you use.
6. Prepaid Interest - Depends on what day your loan funds. Interest is charged until the end of the current month, which is why you "skip" a payment. You are paying mortgage interest until the end of the month and then you pay for the following months interest in your normal payment. Mortgage Interest is paid in ARREARS. That means your August payment is covering the interest from July. Loans that funds in the very beginning of the month can receive an interest credit and your 1st payment is due to very next month. THERE IS ALWAYS INTEREST. Either you are paying the new lender or your current lender (thru their payoff). Same no matter who you use.
7. Establishment of your new escrow account (Home Owners Insurance, City/County Taxes & applicable Flood Insurance) - Towards the end of the year when most counties are due for their annual tax payments, this can get expensive. Collecting between 12 - 13 months of your monthly taxes is required at this time UNLESS your current servicer has already paid your tax bill and the county is already reflecting it is paid. Depending on when your Home Owners Insurance is due, you will also need to have adequate months of reserves for the servicer to pay the annual premium when due, etc. [** Your current escrow balance will be returned to you when your current lender is paid off. Usually takes about 30 days**] Same no matter who you use.