Refinancing a Home Mortgage to Save Money I Think
by The Nice's from New York
Ask Kate about refinancing a home mortgage to save money... I think? Hello Kate, For two months now we (my wife and I) have been dealing with our current lender to refinance our mortgage via the HARP Program. This was all initiated with a phone call that we received from the lender offering a "new deal".
From that day on, we've had to go on a learning "fast track" in order to educate ourselves on this new HARP Program and how it can benefit us.
At the initial meeting we were told that in addition to HARP, we qualified for another program due to our union affiliation. This other program (which is only offered through our lender) would reduce our closing cost to $100 as they would cover the bulk of the fees.
It all sounded too good to be true, and now it seems like it was! The new rate that we were offered was 2% less then our current one (good), and we were told that the HARP program did not allow for the borrower to make a profit from the loan, in other words we could not refi for an amount larger than what was owed (also good since we don't want additional debt). All this seemed fair, and our house LTV ratio is under 105% anyway.
So here is the problem, with every Good Faith Estimate that we've received, we've seen the mortgage closing costs just continue to rise. The loan amount on the GFE is at least $4,000
more than our current loan!
As stated above, I was under the impression that we could not borrow more than what we owed, so I asked the loan officer about this higher loan amount. The response that I received was, that the closing fees and their attorney fees were being added to the loan (again not disclosed at the original meeting).
This information seems to go against the initial statement that our closing cost would be around $100 due to the other program. Somehow all of these other fees seem to grow or be added with no real explanation as to why!
In the process, we were also told that in order to get the new rate, we would have to pay points, and that too would be added to the loan amount. Is there any information that we could review to ensure that we don't end up getting a raw deal?
I understand in the long run that the lower rate can lead to overall savings, but I'm concerned that we're not getting all of the facts on what we're really getting. Any advice is welcomed. Thanks.
Kate Answers: Refinancing a Home Mortgage to Save Money... I Think
First things first, have you asked yourself if you still trust your lender since your mortgage closing costs on your Good Faith Estimate have increased from $100 to $4,000? ...because it sounds to me like you are already getting a raw deal.
Think about it. Since you made mortgage application, communication and reliability have flown out the window. Perhaps it is time to cut your losses while you're ahead and switch to a new lender.
Although there is familiarity in going back to your current lender for another mortgage, remember, in most cases, you can use any participating mortgage lender for your HARP process.
Good Faith Estimates and Interest Rate Lock-In Agreements
On the other hand, you know your situation better than anyone else. So if you decide to continue with your current lender (or use another lender for that matter), make sure you get a signed copy of your written Good Faith Estimate.
Secondly, lock in when you are satisfied with current interest rates. But first read the mortgage interest rate lock-in agreement
very carefully. Again, ask for a signed copy with the terms.
Go here to educate yourself on the inner works of a Good Faith Estimate and Mortgage Closing Costs
. Then click here for crucial information about locking in your interest rate and avoiding hidden fees
It is worthwhile to note that I receive an alarming number of letters from borrowers who discover in the transaction that they did not understand under what terms their interest rates were locked. You can see the letters at Ask Kate about Locking Mortgage Rates I
and Ask Kate about Locking Mortgage Rates II
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