The Right Way And The Wrong Way To Refinance Your House
The national interest rate is lower than it has been in thirty years, so Chrissy and I decided to refinance our mortgage at a lower rate. We initially bought our house with a thirty year fixed-rate mortgage at 6.5% interest. We figured that we could get a better rate now and get out of paying private mortgage insurance (PMI). This isn’t our first try at refinancing. Our first attempt, back in June of 2008, was a debacle.
Chrissy signed up for “Lending Tree” on the web, and it was a terrible experience. Lending Tree promises that lenders will all compete for your loan so that you get the best deal. That would be fine, if Lending Tree juggled the lenders’ proposals for you. Instead, Lending Tree hands out your contact information to dozens of hard-sell telemarketers. In effect, Lending Tree throws you to the wolves.
We got phone calls from mortgage lenders for weeks, and the plans that they offered were terrible. They tried to tack on points and fees, and I would argue, and they would belittle me for disagreeing with them! I pitted a few of them against each other, but that didn’t pan out either. They got mean when we didn’t accept their plans and treated us pretty rudely. Soon, we just gave up and told them all to stop calling.
Then a few months later, we settled on refinancing with our existing mortgage bank, Chase. Chase sent out a home appraiser to let us know how much our home was worth. It wasn’t a satisfying number. The bottom had already fallen out of the housing market, and we were hit hard. They appraised us at just $6000 more than we paid, despite the massive updates that we had made since moving in.
Chase told us that because our home had a low loan to value ratio (we got scammed by their appraiser!), we would not be able to stop paying for mortgage insurance. Well, that was the whole point of refinancing! The rates were still averaging at 5.8% at the time, and the slight decrease that we would get didn’t warrant paying all of the closing costs for refinancing, not without getting out of the PMI.
So we waited. And eventually, the entire economy (not just the housing market) tanked. The nation’s loss was our gain! Chrissy’s mom recommended a local mortgage company, “Lake Mortgage“, that offered to bring us down to 4.75% on a fifteen year fixed-rate loan. This would then bring our monthly mortgage payments down by $100 and get us out of the monthly PMI payments, which made us very happy.
The closing costs will be about the same as a regular mortgage payment, but we won’t have a mortgage payment for that month, so we’ll be even. I’m pretty glad that we held out now, given the really low rates that are appearing. Plus, we tend to pay more towards the principal of the loan every month, so there’s a good chance that we’ll own our home outright within ten or twelve years!
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