Mortgage Refinance, Again

When we did our last mortgage refinance exactly one year ago this time, we thought we were done with it because at that time, the nationwide mortgage rates were at historical lows and the rate we got, 3.875% for a 15-year fixed loan, was as low as we could get back then. Though the last refi didn’t lower our monthly mortgage payment by much, we were happy that we were able to save some money with the refinancing since the process itself didn’t cost us a penny.

Well, look how things have changed in one year, in a bad way. The economy is still struggling with no improvement insight, the unemployment rate is still high, and the  mortgage rates are even lower!!

Since last refinance in September 2010, I stopped following mortgage rates until early this month when I accidentally checked the 15-year rate and I was basically shocked when I saw the average rate on bankrate.com was at 3.375%. That was half of a percentage point lower than our rate. So I called  the broker who helped us refinance last year and on the same day, I completed and submitted all the required documents. A couple of days later, the broker told us that the rate was locked at 3.25%. With the new rate, we will save more than $300 a month in mortgage payment, much better than the refi we did last year. Since the refinancing was done with the same lender, the whole process went very fast. In a little over two weeks after the rate was locked, we signed all the paper and closed the transaction.

With the two refies since  we bought the house in April 2010, we were able to lower our mortgage rate by 1% and reduced the monthly mortgage payment by nearly $400.  That’s a big chunk of money saved, especially when both were done without any additional cost on us (even the appraisal fee and credit check fee were reimbursed by our loan broker). That’s the main reason for us to do the refinancing again in such a short interval since last one.

BTW, since it’s a new 15-year loan and if we borrowed the same amount as we had in our mortgage balance, it would be like starting all over again because we have already paid for one year. So eventually, we reduced the total amount borrowed this time by the amount equivalent to one-year principal. And with some extra payment each month, we hope we could pay the loan in 14 years if not faster :)

So are you planning to refinance your mortgage? With rates so low, it’s almost certain that you will come out ahead with a refi now.

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2 Responses to “Mortgage Refinance, Again”

  1. HP |  Sep 30, 2011 at 11:12 am

    When you say it didn’t cost you anything. How is that possible? I mean if you didn’t pay it upfront, then did they principal loan amount went up to cover for those costs or did the loan broker basically added 1/8 of point to recover his/her refinance costs. I would love to hear your thoughts and see the math (that you must have done in order to refinance especially to save just a half percent and that too with in a year).

    • Sun |  Sep 30, 2011 at 11:40 am

      It’s a no cost refinance and there’s no points. Basically, our only responsibility are the first month of escrow account, which includes loan payment of the first month, property tax and insurance, and government recording fee. The broker reimburse us all other fees, such as appraisal, credit check, title insurance, etc.

      I would imagine that the broker subsidized the refinance so he made less money with this refi, but since there’s no cost to the borrower, he could do more refies like this to make up the difference.