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10/04/2006 08:09:50 PM · #1 |
Ok...here's the short version:
6 months ago took out construction loan for new home.
In one month it will convert to a mortgage (adjustable after 7 years).
I could not afford the fixed rate at the time.
Bank called...
Says rates have fallen and asked if we want to refinance to a fixed rate for same term and drop the higher adjustable.
I would save $70/month and over $25,000 over the years.
This deal will cost me $350 in fees. So I would break even in 5 months.
I your opinion...should I take this deal now OR will rates fall even more in the coming months?
Help !!!
Kenskid
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10/04/2006 08:12:16 PM · #2 |
| Sounds like you're getting a pretty good deal, and there's no guarantee that the rates will go down any further... |
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10/04/2006 08:17:38 PM · #3 |
Not sure what your fixed rate offer is, but around here rates are in the upper 6's - which is still pretty darn good for a mortgage. When I first looked for a home to buy, we were looking at 12% interest. Your refinance fees seem reasonable, but if I were you and I wanted to take the offer, I'd ask them to waive the fees. Nothing ventured, nothing gained I always say.
If it drops drastically lower (which I honestly don't see happening, but my crystal ball is a bit fuzzy), you can always refinance again.
So in a nutshell, my advice would be to take it - but I'm just a Realtor, not a financial advisor. |
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10/04/2006 08:18:25 PM · #4 |
| Is there anything keeping you from refinancing again in 5 months if the rates drop again? If it were cost effective, I'd get out of the ARM, just for the peace of mind. |
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10/04/2006 08:26:14 PM · #5 |
Been through this decision numerous times over the past 22 years. Waiting is always a risk, the trick is assessing how great a risk. The Fed seems like they are holding the line on rates, and the housing market has really slowed down. That slowdown is bound to drive up competition in the mortgage market.
Find out how long you'd have to take advantage of those low refi costs from your current bank. I'd also agree with jpochard, in the current market you can definitely ask if they will waive or reduce the fees; nothing ventured, nothing gained. Make sure they know you are shopping the competition as well. |
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10/04/2006 08:37:56 PM · #6 |
Seems like you guys say it is worth a try. I'll ask about cutting the fees, however, IMO...I say.. what does the bank have to gain if they cut the fee? I guess only the risk is if they don't cut the fee, I may refinance somewhere else!
For the bank to refinance lower with no upfront fee seems to be a GREAT deal because I will be paying less to the bank per month and saving tons overall with zero upfront cost to me. I'll hold out hope that they will cut but not eliminate the fee!
Thanks for your opinions.
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10/04/2006 08:40:22 PM · #7 |
I am in the mortgage biz...first off, depending on the state you're in, usually you can save a lot more than $70/month coming out of a construction loan. Fixed does not always mean better/cheaper, there are some excellent ARMs available...most people don't realize that if you are in a good program, you're rate won't move a lot. There are a lot of variables. Firstly, what is your primary concern...monthly payment or rate? Do you want to accelerate payments? What state are you in and how is the market? There are some great OPTION ARMs available now...gives you the option of 4 payment choices each month...neg. amm, int. only, fully amort, and accelerated. Email me your scenario and I will be happy to give you an idea of what you can do and give you an idea of rates, etc.
www.staci@amcred.com
=) |
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10/04/2006 08:47:34 PM · #8 |
| also...not trying to sell you a mortgage, LOL Just offering my advice. Keep in mind that ALL lenders charge fees...the difference between a bank and a mortgage broker is that a bank does not have to disclose the fees they charge on the back end...brokers do. Sometimes, it's worth paying a point or even 2 to get the lowest rate. A bank will charge you a higher rate and make their money that way, and you will be none the wiser because they don't have to tell you. Also, stay away from portfolio lenders...the BEST deal you can get would be through a broker with no YSP...will cost you upfront, but save LOTS in the long run. Make sure you have no "prepay penalty" remember this too...making just ONE extra payment per year will cut 7 years off your term. |
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10/04/2006 08:55:33 PM · #9 |
I've researched rates here since my construction loan and what the bank is offering is slighhhhttttly better than any internet or other bank offer here.
My goal is to get the payment down as much as possible. The insurance here is VERY VERY HIGH since the hurricane. $70 is a big chunk of change to me right now. Also...jumping out of that ARM and into the fixed will help me relax a bit in the first full years of my loan...especially if rates inch up!
Originally posted by BlownAway:
also...not trying to sell you a mortgage, LOL Just offering my advice. Keep in mind that ALL lenders charge fees...the difference between a bank and a mortgage broker is that a bank does not have to disclose the fees they charge on the back end...brokers do. Sometimes, it's worth paying a point or even 2 to get the lowest rate. A bank will charge you a higher rate and make their money that way, and you will be none the wiser because they don't have to tell you. Also, stay away from portfolio lenders...the BEST deal you can get would be through a broker with no YSP...will cost you upfront, but save LOTS in the long run. Make sure you have no "prepay penalty" remember this too...making just ONE extra payment per year will cut 7 years off your term. |
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10/04/2006 10:39:07 PM · #10 |
If you are rate conscious and want to save money monthly, call a broker...just for kicks. The Bank is offering lower than what you have seen advertised, but probably has YSP (back end points). A broker has access to lower rates which aren't advertised...worth a shot. Tell the broker you will only pay a point and no YSP...a good broker will beat the rate you got from the bank and save you fee's. Do not pay for processing and/or application fees.
Good luck! |
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10/04/2006 10:49:16 PM · #11 |
I have to agree with blownaway..I have used a broker the last few times and beat everyone I know with my rates..and some people had way better credit ratings than me( cheaper camera purchases)...as far as I am concerned I would not hesitate to use a broker again...
and I am definitely not trying to sell you anything |
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10/06/2006 09:58:40 PM · #12 |
Originally posted by kenskid:
Seems like you guys say it is worth a try. I'll ask about cutting the fees, however, IMO...I say.. what does the bank have to gain if they cut the fee? I guess only the risk is if they don't cut the fee, I may refinance somewhere else!
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I was flabbergasted when I first realized that on a 30 year loan, the interest is often more than the price of the home.
For example, $150,000.00 financed over 30 years at 6.250% draws $182,640.00 in interest over the life of the loan. A 15 year loan is substantially less (about 1/2 of the financed amount) but still a lot of $$$! I'd say that's what banks have to gain by cutting the fee. |
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