Monday, April 8, 2013

OMG we are going to Refinance... NO JOKE

Okay, so you have all heard me COMPLAIN and MOAN and GROAN about how we couldn't refinance because we missed that happy little window of opportunity with the new mortgage regulations and our fees would go through the roof and wipe out any savings?

Well, it turns out I found we have another option. A normal refinance!

On a whim, I walked into BOFA on Thursday after work last week and asked to see if a mortgage rep was there and available. As the lady was telling me he was gone for the day, he walked in, smiled and told me to come on over and he'd help me see what we could do.

Call that perfect timing or what?

Apparently property values in my area have soared and nothing, I repeat nothing, is going for less than $200,000.00 here... including 1 bedroom condos (if your new to the show, I bought my condo at $120,000.00 three and a half years ago).

After hearing about that we started looking at what rate we could qualify for a few different options (30 year fixed no fee, 30 year fixed with fees, 20 year with fees, 15 year with fees), and how much we would need our home to appraise for to make it all happen (about 140k).

Basically I also learned my idea to streamline our FHA loan once we paid down the balance enough to have 20% equity would be littered with fees and that we would be best off doing a basic refinance and kicking the FHA loan to the curb.

All of the options below eliminate our MIP/PMI fees all together because the loan officer thinks our home will appraise for at least $150,000 on the lower end... $180,000 on the higher.... so we would have 20% equity and not need to pay those.

Here are all our options:

  1. 30 year fixed at 4.25% with No fees. Mortgage balance stays the same.
    1. P&I- $546.05 | Taxes $102.00  Total: $648.05 a month (Monthly Savings: $154.93)
  2. 30 year fixed at 3.75% with approximately $2,348.19 in Fees.
    1. P&I- $519.15 | taxes $102.00 Total: $621.15 a month (Monthly Savings: $181.83)
  3. 20 year fixed at 3.50% with approximately $2300-2700 in fees 
    1. P&I- $657.36 | taxes $102.00 Total: $759.36 a month (Monthly Savings: $43.62)
  4. 15 year fixed at 3.00% with approximately $2,300 in fees
    1. P&I- $774.14 | taxes $102.00 Total: $876.14 a month (Monthly Savings: $-73.16)

I took all the print outs and went home to SCB to layout our action plan.

We decided that even though we currently pay an extra $54.22 a month to our mortgage that we needed to go with an option that lowered our monthly payment... so while the 15 year fixed mortgage was mighty tempting, we eliminated that option right away. We also eliminated the no fee mortgage because the higher interest rate didn't save us too much more on the monthly option since our mortgage balance is not so significant and we plan on being here a few more years at the minimum. So we had boiled it down to 2 options... The 30 year fixed rate mortgage at 3.75% or the 20 year fixed rate mortgage at 3.50%

The major question became about what is more important. Money now in our pockets, or Less over all interest and time.

After much debate, we decided to go for the 20 year fixed rate mortgage.

If this was a year ago, we would have gone the other way because money in our pockets would have been a much more important factor if we were facing a year of still waiting to apply to expunge SCB's old record. But now that, that process is almost complete, we should be able to increase our income soon with additional work and other expenses we plan on cutting.

Plus I also hated the idea of re-starting my loan back out to 30 years. We aren't sure if we would keep this place as a rental unit in the future so our goal is to pay it off as soon as possible so we would most likely continue paying the amount we are paying today... so we might as well get the slightly better interest rate and the knowledge that even if we didn't throw extra on the mortgage, we'd still pay it off faster than we would right now with us making an additional payment each year.

So the process has begun.

As of right now we are rolling the fees into the balance of the mortgage and the numbers above reflect the monthly rates with the fees rolled in . Our loan officer set the balance at $113,000 just to be on the safe side, but we won't know for sure until we actually get our home apprised and figure out all the nitty gritty details.... but we might pay the fees out of pocket. We aren't sure yet.

First step is the appraisal. After that we re-evaluate. This month we won't be adding extra to our mortgage because we will need to pay for the appraisal fee...

Here's wishing us lots of luck!

Think we made the right move with deciding on the 20 year mortgage instead of the 30?


  1. Did you already lock in your rate? 30 year rates dropped to 3.375% on Friday.

    1. I think we did... but that's crazy!!! The appraiser will be here today actually so we are crossing our fingers...

      We haven't signed anything, but he did paperwork on his end so i'm not sure if we have locked in our rate yet.

  2. Call him right away to see. Usually if you lock, you sigh right away.

  3. If you pay extra every month (and pay it to principle - make sure that is evident) you will take years off your mortgage. If you make the 15 year payment on the months you can afford to, and less on the months you can' will be like having the 15 year mortgage but with flexibility. Also make sure there is no prepayment penalty. Sometimes you can do your own escrow, too. They may make you pay for that ability but at least you know your escrow payments are being made on time and correctly.