Strange Refinance sales pitch from bank
Chase is my current mortgage holder contacted us to offer a refinance. They say it will reduce the interest with minimum to zero closing costs and term reductions. I’m really skeptical about it, as we refinanced with them around 1.9 years ago and I felt robbed after the closing costs/points they charged. They mention no…
Chase is my current mortgage holder contacted us to offer a refinance. They say it will reduce the interest with minimum to zero closing costs and term reductions.
I’m really skeptical about it, as we refinanced with them around 1.9 years ago and I felt robbed after the closing costs/points they charged. They mention no income check, no appraisal, etc. We are at 18years and pay over 1K in additional principal on top of the regular payment to finish sooner. We pay probably over 20K in interest per year. The offer sounds tempting, but just don’t trust chase or any other bank now a days. Is anyone else getting sales pitches/offers to refinance from their banks?
Be forewarned — I fell for the same refinance pitch from Chase last summer, paid $700 for certain fees and then had an appraisal that was unbelievably low–you couldn’t buy a one bedroom in my neighborhood for what this guy came up with. It was still high enough to give me 40% equity after the refi, but nevertheless Chase turned me down. And lo and behold, no one ever answered my calls or emails about the matter, and I didn’t get the $700 back. If I try again this year, I will go to any bank but Chase.
it really comes down to the math. when the yield curve is sloping upward heavily it can pay to bring in the term if your principal is lower. this is the pretty much the scenario now.
coming down on the yield curve in terms length (i.e. have paid off some principal) the rate is also lower, and its like a double benefit. it all depends on where rates are at any given term on the curve.
for example if you are 15 years into an original 30y fixed @ 5% and have now paid down 30% of your principal (typical amort) the payment on a 15y @ 4% would save you a couple hundred a month and $4k less in annual interest in year 1 vs. what you were paying on the old loan. Definitely a win. bottom line in this typical-ish scenario is that you save $55k in interest over the whole loan. this is what you want to care about if you wish to create wealth for yourself.
basically, if you can afford to keep your monthlies the same it frequently pays to bring in your term because of 1) how a fixed mortgage amort works and 2) in an upward sloping curve a shorter term caries a lower rate.
but only the math will confirm this. just go online and use a mortgage calculator with amort schedule to calculate the payment and have a look at the amort schedule totals.
We have a jumbo mortgage and just refinanced with Chase (whoc was our original mortgage holder) for an almost 1% drop in rate. The scenario was just as you described – seemed a little weird – the out of pocket costs were extremely modest.
Anyhow, we closed on Friday with no surprises.
5.375 is pretty low. You have to be able to do a breakeven calculation using the new rate to see if it makes economic sense. Calculate the new payment and all other costs that they may charge and if you are saving money over 3 years then it certainly makes sense to do it.
Also, make sure you get a sign off that you will not have to pay the city tax on the new mortgage.
I originally had the morgate for 20Y @ 5.375. Not sure what they are offering, but I see the morgage rates in the BBG web for 15Y @ 4.26.
Chase is also my current mortgage holder, and I got a letter (poorly written, with typos) from the local Chase branch in Park Slope about refinancing. I threw it away as the whole pitch seemed strange — but maybe it’s worth pursuing? What do others think?
hard to say if it’s worth it without seeing what you currently have and what they are offering. If you pay that much in principal over your mortgage you may want to look at a 15 or 20yr mortgage instead of a 30yr.
You never have to pay points if you do not want to. Points will just give you a lower rate.
I just refi’d my loan to a lower rate and I sold it to Chase, my original lender. I actually gave myself a touch higher rate than the lowest available and used the yield spread to offset my closing cost.
Adam Dahill
adahill@wcslending.com
what’s your rate and what are they offering???