And the refinance continues

***I want to make things clear that I am writing a review of my refinancing process and am IN NO WAY being compensated for this post, nor is AmeriSave even aware that I have a blog. I figure with low interest rates, refinancing might be worth considering for some of you, and it might be helpful to see what my process has been like.***

Seventy-Seven days ago I wrote about my decision to refinance our mortgage. When we bought our house, we locked in at 4.125% and have a PITI (principle, interest, taxes and insurance) payment of $1,689 each month. In January, I noticed rates were considerably lower and figured it was time to wet my feet in the world of refinancing.

I contacted a handful of lenders (my current lender included) and got a few quotes. After some number crunching and phone calls with various companies, I settled on AmeriSave, an online lender out of Georgia. I’d never heard of the company before, and odds are you haven’t either.

I read some reviews, and as expected there were a lot of positive remarks and a lot of negative ones about the company. It seemed that people with generally good credit and a decent income had good things to say.

Why refinance? 

When it comes to refinancing one must not be so narrow-minded, that the only number you worry about is the interest rate on the loan. The far more valuable number to determine whether or not you should refinance is the break even period. That is to say, how long will you have to live in your house to make the refinance worth it.

I could have gotten a 30 year fixed rate of 3.25%, but that would have cost $12,000 in points and fees, meaning I wouldn’t break even for over a decade. I don’t know if I’ll still be in this house ten years from now so it would be silly to take this deal.

If I was going to refinance I wanted my break even point to be 12 months or less.

I locked in my rate with AmeriSave at 3.75% and they are covering all of my closing costs thanks to a massive lender credit. That means my break even point is zero months. Or in other words, I come out ahead starting the very first month!

How dope is that!

Again, I could have taken a better rate with Amerisave, say 3.5%, but I would have had to bring money to closing and had a break even point at like 3 years.

The big benefit to having a zero month break even point is that if rates drop even further over the coming months, there is nothing stopping me from refinancing again.

My new lower rate will save me $100/month, every month, for the next thirty years. LOVE IT! 

What do you need to refinance? 

I have had to provide a ton of documents to AmeriSave (via online uploading) for review by their underwriters. Things like…

  • Three years of Tax returns
  • Three years of W-2’s
  • Three years of Business tax returns
  • Four months of checking account statements
  • Three months of pay stubs
  • Proof of homeowners insurance
  • One month of savings account statements
  • About 30 pages of loan application paperwork

Fortunately for me, I have all of this information neatly compiled on my computer and it wasn’t too much of a headache rounding up the required documents. I’d estimate I’ve spent about four hours total compiling the correct documents and reading through the paperwork and good faith estimate.

How has the refinance process been? 

Going with an online lender I wasn’t expecting things to go super smooth. I’ve read a lot of horror stories online, and my refinance hasn’t been without issue.

I was told that my rate was good for 45 days from the day I locked. Here we are on day seventy-seven. Things are moving at a snails pace. I get them what they need within a few hours or a day of it being requested, but it can be two or three weeks before I get any updates.

That said, my loan processor has been pretty responsive and if I reach out he gives me assurance that, although things are slow, my loan is progressing. He has extended my rate lock twice now at no cost, which is crucial.

I received word yesterday that my loan was finally approved by underwriting and that they are hoping to schedule closing later this week.

Would I use an online lender again? 

You bet your sweet bottom I would. At the end of the day I care mostly about the cost of the loan and the interest rate I can get. The online lenders blew the brick and mortar banks out of the water. I called a few mortgage broker friends of mine and none of them could compete. I called my current lender to see if they would fight to keep my business, they couldn’t.

The process is not fast, that’s for sure (my original mortgage with a brick and mortar was approved by underwriting in 8 days), but I don’t care about speed. I care about money saved, and from my experience online is the way to go. 

  1. Would you ever use an online lender? 
  2. Have you refinanced? If so, had any horror stories? 
  3. If your rate is above 4%, why aren’t you refinancing right now? 

12 thoughts on “And the refinance continues

  1. We have refinanced a few times too and currently have a rate of 3.5 percent. One thing to remember is that when your loan term starts over again, so does the amortization schedule. So you start out paying the lender a higher portion of interest vs principal like you did when you got your first loan. That is not to say that it doesn’t make sense, but is something worth knowing.

  2. We closed on a refinance a week ago yesterday. We also used an online lender – a company I’d never heard of before. The process was slow, but not quite as slow as yours. We locked in a rate of 3% on a ten year note. The fees were more than covered by the payment that we ‘missed’ with the new loan. I struggled with the lack of communication and slow progress of the whole deal. But a little bit of frustration was worth it for the rate. I researched extensively to compare the rates, closing costs, and even so detailed as the PMI rates they offered.

    The main ‘face palm’ moment for me was to write a letter to the underwriters to explain whether we had a homeowner’s association for the 155-acres of agricultural property we own in rural west Texas…

  3. We have a similar story, except our Refi essentially fell in our lap. We used a local mortgage lender on the purchase of our first home in January 2014 at 4.375% over 20 years and the process was simple enough.

    Well, in February, I get a voicemail from our lender out of the blue. We hadn’t even engaged him in discussing a ReFi, but he mentions a zero closing cost ReFi and it immediately piqued my interest.

    After digging deeper into the details, the lender was upcharging the rate 3/8 of a percent and covering over $5,200 in closing costs + rebuilding escrow. Our new rate would be 3.75% over 20 years, a savings of $170 per month! And the best part is the breakeven point: MONTH ONE!

    In the end, the lender would be making ~$67 per month profit on the loan, so they were gambling that we would either A) stay in the house for at least 8.5 years and/or B) give them future business through recommendations or positive reviews. He flat out told me the reason his company offered the no cost ReFi was because “if [they] didn’t, someone else would” and “[they] wanted to keep [our] loan”.

    So even though we pushed back our timetable ~14 months, we will be able to put more towards paying off principal (or preferably, my wife’s student loans with higher interest) and by planning to pay the loan off early, save at least $15K in interest in the process! Win-win for everyone! 🙂

  4. I received information in the mail about refinancing to 3.75% in October. Everything looked great but then I commented about doing a shorter term loan because I was already in my house for over a year and did not want to start 30 years over again. When they tried to close my loan with my original lender they called me up and tried to offer me a better deal with no upfront cost. I spent about a week negotiating until I received a 2.75% 15 year loan through my current lender and closed in January. There was a lot of paperwork but no upfront cost and it only cost $40 more a month than my original 30 year 5% loan. Best decision ever!

  5. You never said what the payback period was on the 3.5% loan. I know the 3.75% had $0 out of pocket, but I’ve read your blog for long enough that you seem to have a good deal of cash on hand, so if the payback period was a couple of years, it might have made sense to put out the dough.

    Honestly, the lender probably isn’t going to be to worried about the lock-in date so long as the overall rates stay stable. Right now things are pretty flat so they can still borrow the money that they’re going to turn around and borrow to you at the rate they’d initially planned on during the start of your lock-in time. If rates suddenly gapped up, you might see them throw up some resistance.

  6. We refinanced about 6 months ago now with Navy Federal Credit Union and the experience was wonderful. Originally we had bought the house with an FHA loan with only 5.5% down (its a long story).

    The goal was always to refinance out of it as soon as possible. That was possible after 6-months. We refinanced from a 3.75% rate with 1.35% PMI to a 3.625% with no PMI.

    The mortgage payment dropped by almost $400 (mostly from getting rid of the PMI).

    We are in a 5/5 ARM at the moment, which is fine since we plan to pay the house off in 7 years or less.

    Our break even was less than three months. The cost of the loan was ZERO, however we did have to pay for an appraisal and title insurance.

    If rates stay low, then we will look to refi once we reach 20% equity (we are currently at 8.4% and climbing). At 20% equity we could refinance into a 2.5% loan (again a 5/5 ARM). This would allow us to dump the extra savings towards principal.

    Cheers,

    – GYFG

  7. Holy Moly! 77 days! Good grief, am I glad I held off! After your first post about AmeriSave, I looked into doing a refi with them, but had a hard time convincing my husband to go for it (he is heavily influenced by negative reviews…of anything!). Eventually, rates started creeping back up, so I just back burnered it. Plus, I wanted an update on your experience, since I tend to trust you quite a bit.

    77 days seems absolutely crazy to me. We refi’d a few years ago (original lender was BOA, refi’d with Quicken), and it literally took TWO WEEKS from start to finish. What on earth are these underwriters doing that is taking SEVENTY SEVEN days?

    As an aside, I work in HR, so I deal with requests from lenders all the time for mortgages and refis, and it never ceases to amaze me just how desperate the urgency of underwriters is. Like, they contact me at 9am and act as if the sky is going to fall if they don’t get a form returned within 2 hours. I’ve finally started pushing back on them and ask why they’ve seemingly waited until the very last minute to contact me for verification of employment, considering that should probably be the FIRST step in their process. Assholes, the whole lot of them. 🙂

    • Ha. Yeah i knew going it to it the process wouldn’t be fast. But at the end of the day i don’t mind it taking three months instead of 1.5 months since they save me a TON more money than any other lender could. I guess if you have an urgent need to refi quickly, then you shouldn’t go with an online lender, but otherwise I would definitely recommend the process. And like I’ve said, they’ve extended my lock so my rate terms are still what I was promised in January, even though today my loan would have cost about $2,000 more.

  8. Congrats on the lower late! $100 per month over 30 years is a lot of dough. I’m also very envious of your monthly payments. $1,689 per month! That’s almost impossible to do where I’m from.

  9. They have no idea that you have a blog? Hmm…that’s interesting-

    From your “HELOC on hold. Refinance here I come” post-

    “I spent quite a bit of time on Friday talking on the phone, and emailing, with my AmeriSave loan officer and so far everything has been running smooth.

    side note: I may or may not have mentioned to him that I am a Personal Finance blogger who will be writing about my experience. Thinking that might scare him in to taking good care of me.”

    http://www.punchdebtintheface.com/heloc-hold-refinance/

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