Last Friday I shared my grandiose plans to take out a home equity line of credit (HELOC) in an attempt to diversify the liquidity available to me.
That HELOC stuff is soooooooooo
1995 last week.
I’m on to bigger and better things now. And by “bigger and better” I mean, it’s time for me to play the refinance game.
We put in our offer on our house in June 2013. It was accepted the day Ben Bernanke spoke publicly, for the first time, about the reserves plan to slow down Quantitative Easing. Which, in turn, resulted in mortgage interest rates taking a dramatic turn for the more expensive.
May 2013 rates were around 3.5%. By June they had jumped half a percent to 4.07%. And by July 2013 (the month we closed on our home) they were at 4.37%.
We quite literally missed some of the best interest rates in history by 24 hours, locking in at 4.125% instead of 3.5%.
Rates hadn’t moved much over the course of 2014 so refinancing was never really an option, but after my post about taking out a HELOC, some of you suggested I look in to it.
So I did.
I called a handful of banks to get an idea of what rates they were offering on a 30-year fixed refinance. Most of the large institutions (Chase, Wells, Citibank, etc) came back with a rate somewhere around 3.85% and closing costs of about $4,000 to $6,000.
I then used Zillow’s handy dandy refinance calculator to see what the break-even was on that deal. Here’s the graph…
As you can see, I would save $44 per month by taking advantage of one of the big banks rates.
But that’s only half the story.
The break-even point was really what I was concerned with. Remember, I’d have to pay about $5,000 in closing costs to get that new rate. That makes saving $44 per month significantly less exciting. According to math, it would take me 9.5 years to earn that $5,000 back. I was hoping for a break-even somewhere around 2 years or less.
Big banks were out of the question.
Next up, online lenders.
After doing some research I stumbled upon, AmeriSave, a direct lender out of Atlanta.
For my situation (credit score, loan balance, etc) they offered the most competitive rate I could find. In fact, AmeriSave blew the big banks out of the water.
They were offering a rate of 3.75% and THEY would cover all of the closing costs. Ummm excuse me?
Do you want to know what the break even is on the loan AmeriSave was offering? Check out the graph…
That’s right. The break even point starts the day I get my new loan. I get to save $60 per month at no cost to me.
Is this too good to be true?
Maybe. I read some online reviews. Some positive. Some negative.
Fortunately, Girl Ninja and I have excellent credit, all of our financials easily at hand (W2’s, pay stubs, account balances, etc), and a favorable debt to income ratio. I’m hopeful this will help our new loan close with few (if any) hiccups.
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.
The only real risk for Girl Ninja and I is having the deal fall apart, but since we have no out-of-pocket expenses associated with the loan, if things go south we will just walk away and go find a new lender.
I’ve never gone through the refinance process before, but so far it’s been pretty painless.
Here’s to hoping it stays that way for the next 45 or so days.
Standby for more.