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Refi Laboratory: A Common Man’s Pursuit of the Ultimate Mortgage

Posted on | December 29, 2008 | 7 Comments

This is the first of what may become a regular dissertation on one man’s pursuit of the ultimate mortgage

Some background:

My family purchased a home about 4 years ago with a solid rate of 5.625% and a 20% down payment on a conforming (i.e. a loan under the ceiling of around $400,000, depending on where one lives).  The term was for 30 years.  The current loan balance is just over $340,000, and my current payment (of principal and interest only) is 2070.00

Our rate is actually very good – we were fortunate that we were purchasing during a dip in rates.  I am very proactive in looking for a better deal, but am not willing to pay much in terms of fees. I would also like to keep my term lower than 30 years; refinancing to a 30 year term would be walking back the 4 years I’ve already been paying on my mortgage, and I would like to accelerate the time to pay off my home.

Most lenders don’t publish rates for a 25 year loan, so I’ll probably be shopping for 20 year mortgages.

After all the headlines the past two weeks, I expected to have no trouble at all. I have plenty of equity (even in the current free fall of home valuations), and I have excellent credit.  So, I should be able to find a low, low mortgage rate!

Well, it HAS been easy to find extremely low rates.  The only catch is the costs of the loans are enormous — much more, in fact, than any previous mortgage I have entered into. My goal is to find a significantly lower rate with a low fee mortgage product.

I started my quest by rounding up the usual suspects.  I first went to bankrate.com. This used to be a nearly one stop shop for all types of mortgage lenders. However, this site’s published rates have pretty much evaporated over the past year.  I used to find several pages of lenders with competitive rates. Now, I’m lucky if I can find more than one or two publishing rates for my area.

This time, only one rate from Quicken Loans.  They publish a 5.375% rate that barely beats my current rate. Unfortunately, the loan is much too pricey.  The fee published says at least $4700 to get this mortgage. That’s too high a price for less than half a point in rate decrease, and it’s for a 30 year note.  So, I continued my search.

My next stop was with Amerisave.com.  This site had many more lenders offering loans, but it’s a bit less transparent than Bankrate.com. Unlike the bankrate site, Amerisave does not tell you which lender offers which loan, and the fees seem much higher.  On the plus side, they offer many different terms, including 40 yr, 30 yr, 20 yr, 15 yr and 10 yr. loans.
My check showed that a 4.25% rate on a 20 year term could be had for a not so low, low price of $10,921.

That included the fact that I searched using the qualifier “15 day lock.”  Generally, the shorter the time period that the lock is set, the better deal one gets. Most people settle for a 30 day lock.  Buyers of new homes have to contend with the deadline of closing on a sale, and need leeway to ensure that their lock doesn’t expire (which would mean missing out on the targeted rate).   Since I’m refinancing and don’t have to worry about a lock expiration, I’m happy to search for the lowest rate lock period offered.

Still, these prices seem high.  According to an article on bankrate.com, the surge in refinance mortgages last week overwhelmed lenders who hiked rates this past week, if only to drive down demand so that the could catch up with applications. After this backlog comes offline, perhaps rates will ease.  I’m going to keep an eye on rates and see if I can find a better deal in the coming weeks.

Category: Uncategorized

Comments

7 Responses to “Refi Laboratory: A Common Man’s Pursuit of the Ultimate Mortgage”

  1. bill
    December 30th, 2008 @ 7:37 am

    Seeking a mortgage on an new home and the loan costs have jumped terribly! Quicken is quoting $6,700 in closing (no escrows or prepaids) on $270k … ouch!

  2. Joseph Turner
    December 30th, 2008 @ 11:05 am

    I am not clear as to what the “buy in” figures represent. Is the additional money considered “closing costs” or an additional downpayment over what (if any) equity is left in the depreciated home value. Someone please advise

  3. Aron Harris
    December 30th, 2008 @ 11:06 am

    There is one other consideration that you did not mention. If you are planning on doing an assignment of the mortgage tax (depending on the area in which you live) you will at least need a 30 day lock and possibly a 45 day lock (depending on your current mortgage holder)in order to get the work done. Of course this is worth it as you can shave thousands of dollars off of your closing costs.

  4. Refi Lab
    January 1st, 2009 @ 4:56 pm

    To clarify:
    The “buy-in” cost listed was additional points paid on the loan plus other fees — it doesn’t include closing costs such as title insurance, attorney fees etc.

    The home value assumes 20% equity maintained, as the home is in a locale where prices haven’t been as battered as others in the nation, and the price had increased slightly in the earliest years of purchase.

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    [...] Refi Laboratory: A Common Man’s Pursuit of the Ultimate Mortgage [...]

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    [...] Blogger and I had no idea why.  Well, an article one of my good friends wrote back in December, Refi Laboratory: A Common Man’s Pursuit of the Ultimate Mortgage had Refi and Man in the title, hence the reason for Subprime Blogger being number three on the [...]

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    [...] Blogger and I had no idea why.  Well, an article one of my good friends wrote back in December, Refi Laboratory: A Common Man’s Pursuit of the Ultimate Mortgage had Refi and Man in the title, hence the reason for Subprime Blogger being number three on the [...]

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