Wednesday, September 23, 2015

Refinancing: Episode 1

I actually wrote the following article back in March of 2015 when this blog was just an idea. But now that I have finally started the Band I’m going to post it now since the rates discussed are still relative since the Fed hasn’t raised interest rates yet.   




March 2015
We are just starting the process of refinancing our home so I thought that I would take the time to document the process a little and share some of the information that we have learned along the way.

Background:

We originally bought our home in September 2013 on a 30 year fixed mortgage of $139,200. We had an interest rate of 4.625% and a monthly payment amount of $715.68, after taxes and insurance we paid $997.12 each month. We had deliberated about getting a 15 year mortgage at just under 4% instead of the less financially straining 30 year but didn't do it because we had only been out of school and in the workforce for a few weeks and had no idea what we would be able to live on.

But after nearly a year and a half of making additional payments to the loan’s principle we realized that we might be able to make the leap. I have recently began listening to Dave Ramsey everyday at work and you would be hard pressed to find a 15 minute segment where he doesn’t endorse Churchill Mortgage (they obviously pay him a lot of money). In December Davie was mentioning that interest rates were already at a historic low and due to an act of congress they were expected to drop below 3.0% for a 15 year for the first time, “and my friends at Churchill Mortgage can get you the best rate in the industry.” (this is not an advertisement, keep reading).

We still had some big bills coming up at the end of the year due to my son’s birth so I decided to sit on the information till after I got that taken care of. Since only have one big financial deal going on at a time saves us a lot of stress.

Around the end on January though our original loan officer, who we considered to have become a friend of ours, contacted us about this being a good time to refinance. So, with the hospital bills out of the way, we decided to start shopping around for a mortgage rate that might be appealing enough to draw us away from our comfort zone.       

Our friends original offer was for a fixed 3.0% 15 year loan with closing costs around $2,500. (Closing costs just annoy me to no end, I understand most of the reasons for them but it makes me feel like I’m paying to buy my house from myself.)  I really wanted to know what Churchill’s rates would be so I put off giving her an answer until I would be able to get a hold of them. After 2 weeks of not being able to talk to anyone though I looked up some other lenders that advertised low rates. During those two weeks our friends company raised their rate up to 3.125% and I just had a mental block about not wanting it to be over 3.0%.

I found another company that would give us a 3.0% rate and had comparable closing costs. And after forwarding his offer to our friend she say that her company would match it if we could lock in that day. I FINALLY got a hold of a loan officer at Churchill by email, (they never returned my many calls or quote requests) but someone had emailed me a week earlier asking for the best time to call (even though he never ended up calling at all, let alone at any of the several times I suggested). Anyways, I emailed him the offer we had and asked if he could beat it. His reply: "That is a very attractive offer and if that is what they are offering, I would take it."

Nothing like conceding defeat, right. I lost my faith in Davie's recommendations with this terrible experience.

But, with an industry professional telling me that the offer on the table was worth taking I was convinced that we were going to go through with the deal. But I was nervous, and at work, so I turned it over to my awesome wife to look at and pull the trigger on. She decided at the last minute to call the realtor that helped us to buy the house, who she keeps in regular contact with, to see if she had any pointers.

She ended up giving her a name and number of a friend of hers who worked for Union Saving Bank because they were the only lenders that she knew of who didn’t make you re-buy title insurance when you refinanced (roughly $700 of closing cost expenses). He ended up offering her a 15 year rate of 2.875%! Boom, just like that we found a rate under the magic 3% line and cheaper closing costs. I told you my wife is awesome.

It was the end of his business day so by the time she contacted me about the offer and collected the information that he needed to lock us in he had already left for the day. But first thing in the morning she contacted him to set the ball rolling. I believe that was on Tuesday morning. He then emailed us some paperwork to start getting together and lists of information that they would need.

We went to his office on Friday since that was the soonest that we could get there. We signed a few papers and he filled out what information he needed. They needed things like: the past 2 years of W2’s, 2 months worth of bank statements, your last 2 pay stubs, and proof of homeowner’s insurance. He said to expect to hear back from him in a few business days with some more documents and instructions on how to proceed.

A few hours later a man came to our house to get information for the appraisal that the bank had set up - results: our appraisal price have risen from $174,000 to $180,000 in the past 18 months.

*Sorry to have to break this up but the rest of our refi experience can be found here.



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