Refinancing mtg w/ Chase..am I gettin screwed

[GRhino]

Recently I’ve been able to pay off a lot of my debt, so (with better credit) I decided now would be a good time to see what kind of deal I could get to refinance our home. About 1 ½ years ago I got a 30 FHA loan at 6%, that I’m paying through Chase Home Finance.

Last Thursday I talked to a mortgage consultant who told me I could get the loan refinanced at 5.06% for 15 years. When I called him again on Friday, he told me I could now get it at 5.00%. So I took it. I went over it with him several times to be sure there weren’t any loopholes. In his words I was guaranteed 5% fixed rate for 15 years, and I could even get a slightly lower percentage if the interest rate dipped below 5% during the 60-90 day processing period (one time courtesy).

We also discussed the closing fees in great detail. My only closing costs were to be (1) $1,500 title fee (2) $395 application fee & (3) $550 processing fee. So the total costs were to be about $2,445. Then he tells me that in order to start the paperwork process, I would need to pay a $750 “NON-REFUNDABLE” application fee. This was in place of #’s 2 & 3 above. And it was the first time he ever mentioned anything about a non-refundable fee. And no, I didn’t get him to send me anything in writing first…wish I did.

Then when I get home from work today, the paperwork has arrived. The first thing I see is loan amount. I’m expecting it to be $1,500 (#1 above) over the principal balance. But instead it’s $5,900 over. I called the guy immediately & he explained this off as being the amounts for what was in the escrow account & for what I paid at the original closing for the mortgage insurance premium. I’m new to this, so could somebody tell me if this is normal?

After we hung up, I read on & got to the “Truth In Lending Disclosure Statement”. And right away I see an APR of 5.572%. I tried to call the guy back, but he didn’t answer. Can anybody provide some insight as to how I can expect this interest to be spun? Is there any way I’m getting 5% & this page just shows a higher rate for whatever reason?

Any advice would be much appreciated. I’m about to the point that I just want to get my $750 back, but I don’t want to be freaking out over nothing. Like maybe there’s some logical explanation that I’m just missing.

 

[OrangeHair]

APR is always higher (see Google). Most people are too dumb to be able to compare loan A with X amount in fees vs. loan B with Y amount in fees. The APR takes into account those different fees and boils it down to an effective interest rate so you can compare just 1 number.

 

[GRhino]

Thanks for the link. Although I could have done without the "too dumb" comment.

One last question, because I am an idiot about these things..would it be reasonable for an $85,000 15 year loan at a 5% fixed rate to have a 5.572% APR after ******** fees?

 

[El Cid Vicious]

This looks like a good deal for the bank and a bad deal for you. One red flag was when you got convinced that the $750 application fee was "in place of" the $945 in fees the consultant went over with you "in great detail." But here's a bigger question - you owe $85000, so why are you going to all this trouble for just 1% in interest rate savings? That 1% is about $850 the first year in interest (and gets lower in each later year), but you actually save less than that because the mortgage interest is tax deductible. In the 25% tax bracket, for example, your annual savings are only a little over $600. Even if your total closing costs were $2445 as you thought, it would take at least 4 years for you to break even.

You might consider just walking away from the deal, even though you lost $750. Since you are apparently in a position to afford the higher payments of a 15 year mortgage instead of a 30 year, you can do that for free by simply adding more principal amounts to your monthly payment.

 

[BigWill]

IIRC, if you pay off a FHA loan with a conventional, you will receive a refund of your Mortgage Insurance that hasn't accrued.

But I agree with above poster. Why bother with the PITA of the refi. Just pay a little more each month that you have spare cash.

 

[GRhino]

I did several calculations on this to be sure it would be to my benefit to refinance. First of all I just paid about $20,000 in additional principal, which took about 13 years & $57,655 in interest off the loan, if I had taken the full 30 years to pay.

Here's one option I considered:
1) Continue paying on the current note & add $500 in principal payment per month. In this scenario I would pay a total of $25,966.25 in interest & have the note paid off on 8/15/16.

2) Refinance at 5% for 15 years & pay an additional $500 per month in principal. Under this method I would have paid $16,536.99 in interest & have the note paid off on 9/15/16.

So by lowering the interest to 5%, my savings on interest would have been $9,429.26 (25,966.25 - 16,539.99). Even with paying about $2,500 for closing cost, I would have saved about $7,000 in interest over the next 7 years. That was my thinking.

 

[SullHorn]

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[GRhino]

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[OrangeHair]

Sorry for the "too dumb" comment it wasn't necessarily directed at you. What I meant was that some people aren't capable of doing any sort of interest calculation for themselves, obviously you can. You just didn't know the terminology.

One thing you need to consider is that the 9k you are saving in interest is in future (possibly inflated dollars) while the $2500 you are paying up front is in today's dollars.

 

[OrangeHair]

Also, your comparison of your two options isn't exactly an apples to apples comparison.

You might compare a 3rd case where you take the $2500 and just apply that to your principle, keep with your current loan and still pay $500 extra per month. I think the total interest paid will be pretty close to your refinance option.

 

[msdw24]

yes you are getting screwed. IMHO go to a mortgage broker or banker that is independent.....does not work for a big "let me give you the worst deal" bank like Chase.

Take if from someone who left them cause he doesn't like screwing people over. You are probably SOL on your 750 unless you have BIG balances there, and even then they probably wont refund it.

Chase will never have the best rates on anything, cause they are just too big and need to pay all that overhead.