Thursday, February 28, 2013

Refinancing Your Mortgage

LMS really wants a dog and she felt she just had to have a picture taken with this blue metal dog

This is kind of random, but have you taken advantage of the low interest rates and refinanced your mortgage?

We'd thought about it, but it seemed like a lot of work, and I kept seeing things about the costs involved and making sure you'll be in the house long enough to recoup the costs. We don't plan on being in this house forever, so the whole thing seemed kind of pointless.

Then we got a letter from the mortgage company we worked with when we bought the house almost 2 years ago that changed all that.

They were offering a streamline refinance with no out of pocket expenses, a lower interest rate, and a lower monthly payment. I called to confirm the details, since it sounded too good to be true, but it was legit. The problem was that Mr M was due to head back overseas in less than 36 hours, and he was currently half way across the country doing drill with his National Guard unit. A few emails and phone calls later, and he was able to get a power of attorney form signed and mailed to the mortgage company before he headed to the airport. (We used a POA when we bought the house too, since he was out of the country for that one also.)

Last week we closed on the refinance, and I think we did pretty good. The credits from the lender more than covered the cost of the refinance, and we actually ended up with $800+ that the lender will pay on our principal. And we'll get a check for $20. I'm not sure why the two are separate, but I'm not complaining- especially since they're actually paying the equivalent of part of a mortgage payment for us. In addition, our interest rate was lowered by 1.5 percentage points, which in turn lowers our monthly payment.

The whole thing was very easy and painless, too. We gathered some paperwork and took it in to the mortgage company, and then a few weeks later I went to the settlement company's office and spent 45 minutes signing all the paperwork. Easy peasy, no hassle, except for some hand cramps :) We're loyal USAA members, and love everything they do for us (and it's a lot!), but when I checked into their refinance options- for comparison- all the reviews talked about what a hassle it was and how difficult the whole process was. Dealing with a local company made the difference for us.

We'll also get to skip March's mortgage payment as everything is transferred over to the new lender. We considered saving it and doing a double payment in April, but decided the better option would be to finish paying off a credit card (it has a higher interest rate than our mortgage does).

Our monthly payment has been reduced, but we will continue paying the old amount. It's a line item in our budget, so if we leave it unchanged, we can start making extra payments on the principal of the loan. Over a year's time, we'll end up with the equivalent of a couple extra mortgage payments, but it'll all be applied to the principal, and we'll be able to start making faster progress paying down the mortgage. Yay!

Last couple thoughts: because the refinance was a streamline, we didn't have to have the house re-assessed, but we also couldn't change the length of the loan. We had talked about moving to a 15 year loan, but that wasn't an option with the streamline. In the end, it didn't really matter, since we'll still be paying it off quicker by continuing to pay the old, higher amount.

Have you refinanced? Was it a huge hassle, or smooth sailing?


  1. We refinanced our house (obviously not our current one!) about 3 years ago from a 30-year to a 15-year. The new mortgage payment was about $100 less a month, which we just paid as extra toward the principal. There were minimal closing costs involved and the whole process was really smooth for us. We always try to pay $200-300 extra toward our mortgage a month and it really adds up. I really think that refinancing was the reason we were able to walk away with such a huge profit/down payment after selling our house in the fall. Plus, 15 years seems way less daunting than 30 years in terms of how long you owe someone so much money! We'll likely try to refinance our current loan in a couple of years, after we have a bit of equity in our current house (currently we have a 30-year, but would love to have another 15-year if we can swing it!). If that makes sense...sorry for the novel! I think refinancing is something everyone should look into every few years. That and shopping around for car/home insurance (we cut our monthly insurance bill in half by switching companies 2 years ago!) :)

  2. Oh and OP used to beg me to let him take a silly dog statue home from Old Navy! Crazy kids!

  3. We would like to do a refinance, but we need to get past the 20% principal before we qualify. It will take few years until we pass that point I hope the rates are still as low.