Refinancing to take advantage of historically low interest rates
By Ilyce Glink and Samuel J. Tamkin
Question: When we bought our house, I read several books from Ilyce. They not only gave me the power to stand up to mortgage agents, but they also saved us tens of thousands of dollars. I have since passed the books on to a brother-in-law who is considering buying a house.
Now we are looking to refinance our mortgage just to take advantage of the low interest rates so my husband, who is 100% disabled due to his service in the Marine Corps, can retire earlier.
I contacted a number of mortgage companies to see what they would offer. We have a 15-year fixed rate mortgage and have been paying it off for six years. We live in a very expensive area of northern Virginia, just south of Washington DC, and we still owe about $ 230,000 on the loan. We have made every effort to make at least one additional payment each year. The house is worth about $ 570,000.
My husband is eligible for a VA loan, but the rates are not the best.
So far, here is the best deal we have been given: no appraisal, $ 1,050 for title work and notary, $ 570 for some Virginia fees, $ 1,250 processing fee, and a $ 1,250 deposit. good faith of $ 500.
Our current interest rate is 3.375%. A lender offers us 2.75%, but the person who recommended them to us gets 2.25%.
We love all the financial advice we get from Ilyce’s books and from your website, but can you please write a book exclusively on refinancing?
A: Thank you for the kind words on the book and the Ilyce website.
It can be very confusing to refinance your mortgage, but clearly you are on the right track. In fact, you are chatting with various lenders and trying to figure out the best deal you can get today.
Let’s start with your current mortgage. You owe around $ 230,000 on the loan and your house is worth around $ 570,000. That’s well above the 20% required by equity lenders for a conventional loan to bypass private mortgage insurance and well below the limits for making the loan a jumbo loan. Jumbo loans have different rates and costs and often these rates and costs are higher.
The interest rate you are offered reflects the relatively low risk you and your husband present to the lender, but there may be other issues with your credit report that are cause for concern. You didn’t mention your credit score, but said it was below 760; you might not get the lowest interest rate, but something slightly higher.
It is also possible that your lender is not looking for loans like yours at this time. If you live in a townhouse or a condo, some mortgage lenders don’t want these loans on their books, so they will try to discourage you by offering you a slightly higher interest rate. It’s also possible that this lender isn’t offering you the best rate that could exist right now, just because that’s the way this lender does business – and that’s a reason to look elsewhere.
While this is a lot more work, it’s important that you talk to four or five different types of lenders who can each offer you their best loan program and their best fees. We’re assuming you’re looking for another 15-year loan, or maybe even a 10-year loan, and these interest rates should be lower than what you were offered. At the time of going to press, according to Bankrate.com, the average rate for a 15-year fixed refinance was 2.65% and the average rate for a 10-year loan was 2.70%. Mortgage interest rates change frequently throughout the day. The mortgage rate you get depends on a variety of factors, but understanding what makes a “home refinance” can help you sort out your options.
We believe that if you can lower your interest rate, lower your payment, shorten your loan term, and keep your closing costs manageable, it’s home refinancing. But, even if you only get two or three, refinancing may be worth it. We must weigh the pros and cons.
Start by talking to a few other lenders – maybe a local credit union, regional bank, mortgage broker, and online lender – to understand why you’re not getting the best rate and deal. Then you can try to negotiate with your lender of choice. It really is the only way we know of to get the best deal.
Unfortunately, a new book is not in sight for this year; but thank you for your feedback and your encouragement. Good luck with your refinancing.
Contact Ilyce Glink and Samuel J. Tamkin through their website, ThinkGlink.com. (c) 2020 Ilyce Glink and Samuel J. Tamkin