Taking the Plunge to Refinance

My husband and I purchased our home the middle of September. We were stuck with a 6.5% interest rate (which is not horrible), but the day we closed, the rates lowered. With my husband serving many years active duty, he is blessed being a veteran since he was activated after 9/11. (He’s in the National Guard.) So, naturally, we opted for a V.A. Loan.

After spending over 2 hours on the phone with our current mortgage company (which our loan had been sold to), we finally found out that there was no penalty if we paid off our current loan to refinance. We checked a few rates, but I admit not many. We opted for the bank I used to work for since the rates and fees were low. We did a 45-day rate lock at 5%. This was going to save us around $190 per month.

I tried to follow the article titled The Complete Guide to Refinancing and negotiate prices, but there was no budging. I was particularly concerned with the origination fee because I felt that was the best fee we could negotiate. I still never got them to budge. The upside is that we didn’t need another appraisal since we just moved in months ago and many of the fees were really low. The badside is that we had to pay a V.A. funding fee which was at least $1000. There are many benefits to the V.A. loan though, so it is worth the money.

It is going to take us only 18 months to “get back” the closing costs and fees we just paid (around $4000), but it is definitely well worth it because we plan to stay here at least 7 years. There is something big I learned from doing this refinance (we are young, so it is all new to us). We were prepared to write a $4000 check at closing and we were told it was only a little over $100. I started looking at the figures and noticed that our loan amount was raised $4000. They financed our closing costs. It would take us around 5 years to “get back” the closing costs if they were figured into the mortgage. At first, we thought about just putting the $4000 on principle, but then realized our interest would be figured on the higher mortgage amount, which we would be out $2000 because of the extra interest. One of the best things about a refinance is that there is a 3 day Right to Recission. This means that homeowners have 3 days to cancel their refinance. So, we basically cancelled the same day and had the mortgage company re-do our paperwork and closed again the next day.

The refinance was so easy to do for us and I am happy that we did it. If you are thinking about refinancing, check out The Complete Guide to Refinancing. There are some great tips in there. If you have already refinanced, do you have any tips or insight to share? Right now is a great time to refinance, but the rates are starting to raise,