hsmom2011 Posted June 8, 2012 Share Posted June 8, 2012 We get letters from time to time from our bank offering a mortgage with a lower int. rate. I don't pay much attention to these (usually just tear them up and throw them out). This evening they called to pitch their offer to us. What I want to know is - what's the catch? If there is one, they surely won't tell. They are offering a refinance to a lower rate with no closing costs, etc... It's a gov. sponsored program. They tell me there is no catch and with the int rates falling, they don't want their customers refinancing with another company. It's their way of keeping us with them. Ok, what's the catch to this? anyone? :confused: Quote Link to comment Share on other sites More sharing options...
StephanieZ Posted June 8, 2012 Share Posted June 8, 2012 What are the terms on your current mortgage (How many years left? What is the interest rate? Is it fixed? If not, then what are the adjustable rate limits/rules? What percent equity do you now have? Do you pay PMI?) Also, how is your credit? Better or worse than when you took out the mortgage? When did you take out this mortgage? (If it's been more than 2 years, then expect that the current climate is much tougher than it was a few years ago, so if you are borderline creditworthy, it may be hard to refi. even if you got the original mortgage easily with similar credit.) If the terms you now have are substantially worse than you could get on a refi, then it pays to consider options. Rates now ARE very good. If you are credit worthy, it is a good time to refi. if your current terms aren't awesome, especially if you expect to stay in your home for at least a couple years. ALWAYS shop around, though! Quote Link to comment Share on other sites More sharing options...
milovany Posted June 8, 2012 Share Posted June 8, 2012 We get those, too. I don't think they're scams. I think those companies make some money on refi's so they advertise them. If you're talking FHA backed, I'd look in to it (depending on where you are with your current loan). It's just like getting a loan all over again, so you have to qualify under the more current/stricter guidelines. We'd refi. if we could, but wouldn't be able to because of debt-to-income ratio (we own a rental so it looks on paper like we own two homes, even though the rental pays for itself). It's funny to me -- our payments would be lower, so we'd do better financially, but the banks say we don't qualify for a new loan because we don't make enough money. But of course we'd be able to handle the new LOWER payment, we've been handling this HIGHER payment for a long time now without missing a month! Whatever though. It's a tougher world out there mortgage wise. Quote Link to comment Share on other sites More sharing options...
Jean in Newcastle Posted June 8, 2012 Share Posted June 8, 2012 We took advantage of one of those offers. We now have a lower rate. If there is a catch we haven't found it yet. Quote Link to comment Share on other sites More sharing options...
Rosy Posted June 8, 2012 Share Posted June 8, 2012 It's probably legit, and interest rates are very low right now. Our loan officer called us a few months ago with the same offer. We took her up on it and are paying $160 less per month than we were before the refi. To be on the safe side, I would initiate (since it is unwise to give a stranger personal information over the phone) a call to the bank, either to the loan officer who originated your current loan or to another loan officer in the office. Ask them what they can do for you. The one big con that most lenders won't tell you is that you're essentially starting your mortgage over if you refinance--you won't be finished paying off your mortgage until 30 years from the beginning of the new mortgage, versus whatever you have left on your current mortgage. That doesn't mean you shouldn't do it, but it is something to consider. However, if you can lower your interest rate enough, you might be able to switch to a 15- or 10-year mortgage without increasing your payment. Or if you just bought the house within the last couple years, it wouldn't necessarily be that much of a setback and could be worth it if you can free up a bunch of money that would be helpful to you now. Finally, one other big factor to consider is whether you're paying PMI (private mortgage insurance). This is basically just cash that goes to the bank so if you default on your loan, they've made some money on your house. It might apply to you if you have under 20% equity in your home. Personally I think it's a racket. If you're currently paying PMI and you have more equity in your home now than you did when you bought, ask if you can get it dropped. In some cases that could free up hundreds of $$ per month. Quote Link to comment Share on other sites More sharing options...
Sneezyone Posted June 8, 2012 Share Posted June 8, 2012 (edited) We just did a modification on our home loan but not b/c of or in response to an ad. Since I haven't worked in a year, we figured it was worth a shot. We paid no fees and have no prepayment penalties but our interest rate was reduced SIGNIFICANTLY. 2% for three years, 3.25% for two years and 4.5% for the remainder of the loan. No other rate adjustments, just fixed payments. For the next three years our required payment will be $500 less a month! Not that we're going to see that tho. We plan to keep paying what we pay now and be done with the thing in 14.8 years. FWIW - Our credit is fine. We have no late payments or anything. We just had a decrease in income and wanted to see what the bank could do for us. We plan to continue making basically the same payments but will now be able to pay off our loan earlier. I'm not sure exactly what impact the loan mod will have on our credit but from everything we read (because of our existing good credit and paid as agreed loan status), it would be minor. Certainly not enough to turn down the deal. Edited June 8, 2012 by Sneezyone Quote Link to comment Share on other sites More sharing options...
abacus2 Posted June 8, 2012 Share Posted June 8, 2012 We took advantage of one of those offers. We now have a lower rate. If there is a catch we haven't found it yet. :iagree: Quote Link to comment Share on other sites More sharing options...
milovany Posted June 8, 2012 Share Posted June 8, 2012 Whenever I read about loan modifications, the paperwork says it's for people not current on their loan (i.e., have missed a couple of payments). I'd love to get both our home loans modified with a lower interest rate, but we don't qualify for a full refi. From what I understand a modification is the same loan with a lower interest rate (so no qualifying needed). Any info on how/where to find a modification if you're NOT late on payments would be much appreciated. Quote Link to comment Share on other sites More sharing options...
Jean in Newcastle Posted June 8, 2012 Share Posted June 8, 2012 Whenever I read about loan modifications, the paperwork says it's for people not current on their loan (i.e., have missed a couple of payments). I'd love to get both our home loans modified with a lower interest rate, but we don't qualify for a full refi. From what I understand a modification is the same loan with a lower interest rate (so no qualifying needed). Any info on how/where to find a modification if you're NOT late on payments would be much appreciated. We have excellent credit and have never been behind on our loan. We were offered a lower rate by our bank with no fees. Quote Link to comment Share on other sites More sharing options...
AuntieM Posted June 8, 2012 Share Posted June 8, 2012 The "catch" for us was that shortly after a lender-instigated refinance (which did benefit us, financially), we received a letter telling us our loan had been reassigned. We now officially owe our mortgage payments to a US government agency (a periphery one, sort of like Sallie Mae is to student loans, I just can't remember which). Seems the original lender could gain some profit from one of the stimulus packages by repackaging our loan, or some such nonsense. I am pleased we got a lower interest rate. But I would much prefer the money was owed to a private lender. Gotta wonder, though, if there is truly such a thing anymore. :glare: OP, the general rule of thumb is that your interest rate must decrease by 2% to make the refinance worthwhile after closing costs. Of course, if you are currently in any kind of adjustable rate mortgage and have the opportunity to switch to a fixed rate in the refinance, that would be a good thing. Quote Link to comment Share on other sites More sharing options...
Sneezyone Posted June 8, 2012 Share Posted June 8, 2012 (edited) Whenever I read about loan modifications, the paperwork says it's for people not current on their loan (i.e., have missed a couple of payments). I'd love to get both our home loans modified with a lower interest rate, but we don't qualify for a full refi. From what I understand a modification is the same loan with a lower interest rate (so no qualifying needed). Any info on how/where to find a modification if you're NOT late on payments would be much appreciated. DH and I have always been current. It never hurts to ask the bank. As I understand it, you did have to be late when HAMP/HARP first rolled out but recent changes (as of March, I think) mean you don't have to be late. Also, for military borrowers like us who had to move due to orders, you can treat a rental home that used to be your primary residence as a primary residence for purposes of the refi/loan mod. We filled out all the paperwork in April, got an answer in May, and will begin payments on the modified loan next month. It was just like a refi without any fees. We even got to skip a payment while they processed the changes. It could be that we have an especially generous lender (they keep all loans in house for servicing) but I don't believe in purple people eaters (aka generous lenders). There's surely some behind the scenes benefit to this. ETA: HAMP changes were announced in March but took effect June 1. Edited June 8, 2012 by Sneezyone Quote Link to comment Share on other sites More sharing options...
milovany Posted June 8, 2012 Share Posted June 8, 2012 (edited) We have excellent credit and have never been behind on our loan. We were offered a lower rate by our bank with no fees. I went to our lender's website (Wells Fargo) and even there, under options, it says loan modifications are for those behind on payments, and a refi. for those current on their loan. I guess it varies by lender. I will call to find out! Edited June 8, 2012 by milovaný Quote Link to comment Share on other sites More sharing options...
hsmom2011 Posted June 8, 2012 Author Share Posted June 8, 2012 We have excellent credit and have never been behind on our loan. We were offered a lower rate by our bank with no fees. :iagree: Quote Link to comment Share on other sites More sharing options...
hsmom2011 Posted June 8, 2012 Author Share Posted June 8, 2012 The "catch" for us was that shortly after a lender-instigated refinance (which did benefit us, financially), we received a letter telling us our loan had been reassigned. We now officially owe our mortgage payments to a US government agency (a periphery one, sort of like Sallie Mae is to student loans, I just can't remember which). Seems the original lender could gain some profit from one of the stimulus packages by repackaging our loan, or some such nonsense. I am pleased we got a lower interest rate. But I would much prefer the money was owed to a private lender. Gotta wonder, though, if there is truly such a thing anymore. :glare: OP, the general rule of thumb is that your interest rate must decrease by 2% to make the refinance worthwhile after closing costs. Of course, if you are currently in any kind of adjustable rate mortgage and have the opportunity to switch to a fixed rate in the refinance, that would be a good thing. The bank tells me there are no closing costs, which makes me wonder, how are they benefitting from this? Quote Link to comment Share on other sites More sharing options...
Coffeemama Posted June 8, 2012 Share Posted June 8, 2012 The bank tells me there are no closing costs, which makes me wonder, how are they benefitting from this? They benefit by keeping you as a client. We are in the midst of refinancing, i had thought we already had a great rate, but apparently they have come down further. Our payment wont be going down too much, but we are doing a 20 year term, so we are shaving a few years off:001_smile: Quote Link to comment Share on other sites More sharing options...
DawnM Posted June 8, 2012 Share Posted June 8, 2012 They may just be benefitting from you not changing companies. We tried to refi with our (then) current lender and they wouldn't budge, so we jumped ship and changed companies. We did have to pay the $400 appraisal fee, but we didn't have to pay the closing costs. BofA kept calling me to refi too as we have our regular account there. I told them that if they could match the rate we were being offered, as well as no closing costs, we would do it. They stopped calling! :lol: We currently have 3.37% on a 15. It is fixed. Quote Link to comment Share on other sites More sharing options...
acurtis75 Posted June 8, 2012 Share Posted June 8, 2012 There is a difference between loan modification and refinance. If your credit is good and you are current refinancing is a good option if you can get a lower rate and lower payment and then accelerate your debt and or mortgage to reduce the overall time and money spent in debt. Loan modification is for people who are currently behind or anticipate having trouble paying their mortgage. Generally, a lender will try to get a refinance done first and if you don't qualify they will go the modification route. Quote Link to comment Share on other sites More sharing options...
Mommyof4ks Posted June 8, 2012 Share Posted June 8, 2012 We were offered no closing costs a few months back, but the interest rate was .5 percent higher than it was for loans with closing costs. By doing that they can roll the cost of closing into the loan without customers noticing. Your loan also resets to 30 yrs unless you take the 15 or 20 yr loan, so they get that interest on those same years again. We went with a 15 yr, so we had to pay closing costs (the no closing was only avaialbe on 30 yr loans at our bank), but the overall savings is 87,000 in interest, so the closing cost is just a drop in the bucket. :001_smile: Quote Link to comment Share on other sites More sharing options...
southcarolinamom Posted June 8, 2012 Share Posted June 8, 2012 I had a disappointing experience just this week with Churchill Mortgage, the only Dave Ramsey-recommended mortgage company: Our home and mortgage are all in my name. I'm a medical transcriptionist at home by trade, and have been working for the same groups of doctors for 10+ years. My personal credit is good. I have savings and retirement funds to back-up my story. I have 7 years left to pay on a 5.5% fixed rate, and wanted to see what kind of a bargain I could get this week to refinance. Either reducing the monthly amount of my mortgage or shortening the period of the loan was my goal. I printed out their requested paperwork (2 months of bank statements, 1 month's worth of paycheck stubs, the 2011 tax forms, etc) and faxed it in. I was called a few hours later and was told that because we claimed a negative amount on our 2011 taxable income (due to my husband not having work, etc.), "his loss was now considered my loss." They wouldn't touch my request. I couldn't even fill out a loan application with them. When I asked why, since the mortgage info. was all being done in "my name only", he said that the mortgage industry has changed some of its standards in the last 2 years, making it more difficult for refinancing. So I'm totally bummed. The refinance amount is only $45,000. Is this what other people are finding? Quote Link to comment Share on other sites More sharing options...
Country Mouse Posted June 8, 2012 Share Posted June 8, 2012 We took advantage of one of those offers. We now have a lower rate. If there is a catch we haven't found it yet. :iagree: Quote Link to comment Share on other sites More sharing options...
Calm37 Posted June 8, 2012 Share Posted June 8, 2012 We did this about a year and a half ago with Wells Fargo. We had never missed a payment. We even went to a 15 year mortgage from a 30. They just mailed us the closing documents! So easy. No cost, none at all. Did not even have to pay to mail back the documents. Quote Link to comment Share on other sites More sharing options...
k2bdeutmeyer Posted June 8, 2012 Share Posted June 8, 2012 I went to our lender's website (Wells Fargo) and even there, under options, it says loan modifications are for those behind on payments, and a refi. for those current on their loan. I guess it varies by lender. I will call to find out! I haven't finished reading all the responses, but I wanted to chime in on this. Our mortgage is through Wells Fargo and several years ago when DH lost his job, we applied for a modification without any late or missed payments. In our case it we were approved on the basis that we had significantly reduced income. Our payments were reduced by $365/month. Quote Link to comment Share on other sites More sharing options...
AuntieM Posted June 8, 2012 Share Posted June 8, 2012 The bank tells me there are no closing costs, which makes me wonder, how are they benefitting from this? Well, in our case at least, the closing costs must have been covered by the stimulus package funds. When the lending agent called to solicit our refinance, he told my husband they were doing this (at that time) because the time limit for them to do so (I mean for the lending institution to utilize stimulus offerings) was about to expire. Dh was told that these funds had been designated for assisting those wishing to take out a mortgage or refinance, but since there was no rush of clients doing it on their own, the lender was actively soliciting current mortgage holders with refinance offers. Now if there were funds involved and used, and I can tell you they didn't pay down our principle, then how were the funds used? I'm pretty sure they were paid directly to the lender on our behalf. Yes, it was to our benefit, but no, it wasn't a "free" refinance. I don't know if that's the case for everyone in this thread, but it is what happened to us. Quote Link to comment Share on other sites More sharing options...
DawnM Posted June 8, 2012 Share Posted June 8, 2012 Is SC a community property state? I had a disappointing experience just this week with Churchill Mortgage, the only Dave Ramsey-recommended mortgage company: Our home and mortgage are all in my name. I'm a medical transcriptionist at home by trade, and have been working for the same groups of doctors for 10+ years. My personal credit is good. I have savings and retirement funds to back-up my story. I have 7 years left to pay on a 5.5% fixed rate, and wanted to see what kind of a bargain I could get this week to refinance. Either reducing the monthly amount of my mortgage or shortening the period of the loan was my goal. I printed out their requested paperwork (2 months of bank statements, 1 month's worth of paycheck stubs, the 2011 tax forms, etc) and faxed it in. I was called a few hours later and was told that because we claimed a negative amount on our 2011 taxable income (due to my husband not having work, etc.), "his loss was now considered my loss." They wouldn't touch my request. I couldn't even fill out a loan application with them. When I asked why, since the mortgage info. was all being done in "my name only", he said that the mortgage industry has changed some of its standards in the last 2 years, making it more difficult for refinancing. So I'm totally bummed. The refinance amount is only $45,000. Is this what other people are finding? Quote Link to comment Share on other sites More sharing options...
Starr Posted June 8, 2012 Share Posted June 8, 2012 Closing costs can be wrapped up in the loan. If they sell off your loan for a different price than you pay they make something from it. Every bank will refinance your loan if your credit is good. Better rates for better credit. If you lower your interest from say a 7% loan to a 3.5% loan you can save money over time even with some closing costs. Quote Link to comment Share on other sites More sharing options...
DawnM Posted June 8, 2012 Share Posted June 8, 2012 This was not true for us. The way our lender worked it was that you paid $2,000 in closing costs but at closing there was a $2,000 bonus given. So, it ended up being free to us. The interest rate was the same as we could find other places with paying for closing. We did not pay points either. Believe me, my DH is an accountant.....we don't miss the fine print! Dawn We were offered no closing costs a few months back, but the interest rate was .5 percent higher than it was for loans with closing costs. By doing that they can roll the cost of closing into the loan without customers noticing. Your loan also resets to 30 yrs unless you take the 15 or 20 yr loan, so they get that interest on those same years again. We went with a 15 yr, so we had to pay closing costs (the no closing was only avaialbe on 30 yr loans at our bank), but the overall savings is 87,000 in interest, so the closing cost is just a drop in the bucket. :001_smile: Quote Link to comment Share on other sites More sharing options...
DawnM Posted June 8, 2012 Share Posted June 8, 2012 I just looked at Churchill Mortgage's site. They don't even list their rates or closing, which makes me skeptical right off the bat. They don't list closing or anything else. They just say, "click here and we will call you!" I don't wish to talk to a high pressure sales idiot while trying to figure stuff like this out. Usually they will give me some song and dance first asking me what my current rate is and how much I want my payment to go down, etc.... I will respond with, "We don't want our payment to go down, we want to save on the bottom line.....closing costs, interest rates and that huge interest amount dropped significantly on the bottom of the amortized loan amounts!" They don't like to hear that. Right now it wouldn't really benefit us to refi anyway. It would need to drop to about 2% to make it worth our while. I wonder if Dave Ramsey makes a kickback for each refi by endorsing them? Dawn I had a disappointing experience just this week with Churchill Mortgage, the only Dave Ramsey-recommended mortgage company: Our home and mortgage are all in my name. I'm a medical transcriptionist at home by trade, and have been working for the same groups of doctors for 10+ years. My personal credit is good. I have savings and retirement funds to back-up my story. I have 7 years left to pay on a 5.5% fixed rate, and wanted to see what kind of a bargain I could get this week to refinance. Either reducing the monthly amount of my mortgage or shortening the period of the loan was my goal. I printed out their requested paperwork (2 months of bank statements, 1 month's worth of paycheck stubs, the 2011 tax forms, etc) and faxed it in. I was called a few hours later and was told that because we claimed a negative amount on our 2011 taxable income (due to my husband not having work, etc.), "his loss was now considered my loss." They wouldn't touch my request. I couldn't even fill out a loan application with them. When I asked why, since the mortgage info. was all being done in "my name only", he said that the mortgage industry has changed some of its standards in the last 2 years, making it more difficult for refinancing. So I'm totally bummed. The refinance amount is only $45,000. Is this what other people are finding? Quote Link to comment Share on other sites More sharing options...
southcarolinamom Posted June 8, 2012 Share Posted June 8, 2012 I just looked at Churchill Mortgage's site. They don't even list their rates or closing, which makes me skeptical right off the bat. They don't list closing or anything else. They just say, "click here and we will call you!" I don't wish to talk to a high pressure sales idiot while trying to figure stuff like this out. Usually they will give me some song and dance first asking me what my current rate is and how much I want my payment to go down, etc.... I will respond with, "We don't want our payment to go down, we want to save on the bottom line.....closing costs, interest rates and that huge interest amount dropped significantly on the bottom of the amortized loan amounts!" They don't like to hear that. Right now it wouldn't really benefit us to refi anyway. It would need to drop to about 2% to make it worth our while. I wonder if Dave Ramsey makes a kickback for each refi by endorsing them? Dawn I just googled your question! SC is an "equitable distribution state", not a community property state. I'm going to contact my current mortgage company (Chase Mortgage) and see if they can help me.... Quote Link to comment Share on other sites More sharing options...
hsmom2011 Posted June 15, 2012 Author Share Posted June 15, 2012 We have never been behind on payments, and the man I spoke with today said we had to be current on our motgage pmts to qualify. He told me this is a refinance. I'm waiting to get the documents in the mail so we can review them. We can cut a few years off our mortgage and about $130 off our monthly payments. Quote Link to comment Share on other sites More sharing options...
ChocolateReignRemix Posted June 15, 2012 Share Posted June 15, 2012 We have never been behind on payments, and the man I spoke with today said we had to be current on our motgage pmts to qualify. He told me this is a refinance. I'm waiting to get the documents in the mail so we can review them. We can cut a few years off our mortgage and about $130 off our monthly payments. We are getting ready to close with Chase on our refinance. Same deal - no closing costs, and a low fixed rate for 15 years. We were planning to pay off in 7 years, but with the lower rate that will now be under 5. Quote Link to comment Share on other sites More sharing options...
melissad2 Posted June 15, 2012 Share Posted June 15, 2012 I tried a modification with Chase and they are a bunch of bumbling idiots. They lost our paperwork multiple times never had any info when I called and finally denied it because we weren't behind on payments. Quote Link to comment Share on other sites More sharing options...
SMRB Posted June 15, 2012 Share Posted June 15, 2012 If you're current on your payments, have some cash to pay down your principal (usually $5-10K or more) and don't want to do a refi, you can ask for a reamortization of your loan. It's not worth refinancing again for us, so we've done the reamortization twice and reduced our payments significantly each time. You don't get a rate reduction like you would on a refi, but you also don't extend the term of your loan, and there's just a small processing fee to do it ($250 with Wells Fargo). It's an option most people don't know about. Quote Link to comment Share on other sites More sharing options...
Candid Posted June 15, 2012 Share Posted June 15, 2012 If you want to refinance, then I'd suggest finding a place on your own using your local phone book! We always try to use a local bank. AND it is a good time to refinance: 3%. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.