Anne was having computer issues and wasn't able to leave a comment on my RE-FI post. She emailed me her response and I asked her for permission to copy and paste it onto my blog. This is her experience with refinancing her mortgage and what she has learned along the way:
"I am somewhat of a pro in the re-fi area. If there was a way to save money, I found it. I also found ways to get settlement costs down and often negotiated with banks by using whatever hardship was going on in the country at the time. NOW is a good time to negotiate with banks.
My latest re-fi was in April 2009. Up until then, I typically re-fi every 4 to 5 years or so depending on the rates. We bought in 1994. My objective is to keep my payment down to a manageable level so that if only one of us has income we can pay the mortgage. I believe this last re-fi will be our last because it was a success to meet our objectives. I will explain.
We started out 1994 with the high interest rates at the time with 8%/and 3 points at $1200/mo divided into two payments of $600 every two weeks for 15 year mortgage. It was great. Three years into it, I ended up having to go p/t at work - from $50,000/yr down to $20,000/yr. We still had 11 1/2 yrs left on mtg - give or take six months because of bi-weekly payments.
So we re-fi'd for 30 years (it didn't go over big with hubby after getting used to the idea that 15 years the house would have been paid off). We nixed the bi-weekly payments because of our/my drastic income changes. The 30 year mtg was 6.50%/2 pts (not great but better than 8%) and payment was down to $975/per month (one payment, a good savings) but the bank wanted to escrow our insurances and taxes.
I hate when I have had to do that because in the past Bank of America pays nothing on time, if they remember to pay them at all. It is good in that you don't have to think about it - it is paid each month. Every year BOA would say there wasn't enough escrowed and balloon us somewhere around $2000 usually at Christmas time. I was sick of that. But I kept that mtg until the rates came down last April.
I re-fi'd again and got 4.25% (a great rate with NO points)for 30 years and took $30,000 cash out of equity so they had to give us the cash at settlement. We are still under what we originally paid for the house but prices have gone up considerably here - $100,000 houses now run between $350,000-$400,000. So our equity is humongous - $30,000 cash out was not a hardship.
Check out if you have enough equity to get some cash out because the rates are so good now it is almost like free money to do whatever you want - home repairs, vacation, bonds, tuition, etc.
Settlement is just as if you are buying a house again....which you are!!! -- you are re-buying your house at a better (hopefully) interest rate at a better price (hopefully less than or equal to what you paid for it).
Of course, the objective is to get your payment and interest rate down. Nowadays, you have to think so far ahead as to whether you can manage a mortgage if only one had income. I was told the rule of thumb is two week's pay = to one mortgage payment. But I don't know anyone who can manage that when they have high mortgage payments in the first place. Re-fi should make that easier - so I am told the rule of thumb for re-fi should be 60 work hours = to one mortgage payment. (They must be talking about a CEO salary!!! LOL)
If you cannot save at least $100 a month and bring your interest down at least one whole point, a lot of banks won't touch you. And the rates are negotiable.
I negotiated our 4.25% down from 4.75% by telling them the results of other banks/companies I had contacted. They wanted names, numbers and contact numbers - which I was glad to give them - anything to get the rate I wanted. So shopping around does pay off.
I am proud to say we are solvent again. Hubby is 62 but can't retire until 66. I am on disability and only work one day a month now at the hospital. I have to keep my income down because of SS.
The $30,000 cash out at 4.25% was a good move because we have liquid assets again. We stretched to a 30 year mtg. and now our payment equals what I get on Social Security. So if hubby retires or dies or has an illness that forces him to go on disability, we can still pay the mortgage. Which is why we re-fi'd.
We are also not escrowing taxes and insurances and if you are comfortable paying your own, on a re-fi, you do not HAVE to do it. We have been paying our own for the last two re-fi's and it has helped us tremendously.
Check your closing cost sheet -- there are some items you can negotiate on it. If you have a friend who is in real estate - they can be a great benefit to you giving advice on it.
Good luck with the re-fi.....The paperwork submission process, appraisals, and documentations are the worst part. And remember this process is only a headache until the final papers are signed." LOL
**Thank you, Anne, for taking the time to respond to my re-fi post! I really appreciate it!**
If any of you have re-fi experiences that you would like to have guest-posted on this blog, feel free to leave me a comment or shoot me an email! I'd love to hear from you! :)
**UPDATE: I was just over at Anne's blog, and she really needs some positive words sent her way. She has been a victim of identity theft and if that has ever happened to you, I am sure you can understand what she is going through!!**