When refinancing becomes a contact sport
Posted
Mar 23 2009, 01:54 PM
by
Joan Melcher
Rating:
There we were in the crosshairs. We had three hours in which we could still cancel the refinance loan on our house, and an online mortgage entity was making an offer that was difficult to refuse -- a half a percentage point lower than the refinance we had signed two days before.
You might think it was a simple decision. But, as with most refinances, it was anything but that.
We had received the phone call early in the morning from a company we spoke with months before about refinancing, a company with a known name and which appeared, without any research on our part, to be a legitimate mortgage broker.
We must admit, we were intrigued because we knew that after months of waiting -- and then finally deciding to go ahead what with appeared to be a great rate -- 4.875% -- that the interest rates for housing might actually fall to the 4.5% the Fed had targeted in December when it pumped money into Treasury bonds.
Rates had fallen some, but were still short of the 4.5% rate we had stuck in our mind. Now the Fed was putting more money into Treasury notes and it seemed, gamblers that all refinancers are, we had left the game too soon.
So we talked to the online guy and about 1 p.m. he came back with an offer: a 4.375% interest rate over 30 years, which would result in a monthly payment that was $60 less than the refinancing with our local mortgage broker. To put it in perspective, over 30 years, we’d save $21,600 in monthly payments. We’d have to pay 2 points for this rate, but we were already paying 1.5 with our local company.
The online guy said he’d call back by 2:30 our time.
On the other hand our local mortgage broker had been the epitome of patience. We broke a lock on a rate in December when we heard that the rates would likely go down. After that she had diligently sent us lending rates daily and listened to our seesawing about when to jump -- for three months.
Should loyalty extend to more than $20,000? Probably not. But could we really trust the interest rate held out by an online company and a person we’d never met?
We e-mailed and called our local broker. While waiting to hear from her, we considered several questions.
- How much would it cost to cancel the current deal? (About $800).
- Was the online broker guaranteeing a lock on the lower rate? (We’re not sure.)
- Did we want to go through this again? (Not really.)
Here’s what transpired:
- Our local broker called back and offered to shave our rate to 4.75%. She questioned the viability of the 4.375% rate.
- The online guy didn’t call back when he said he would. He left a message on our line later in the evening.
- We accepted the local broker’s offer.
Could the 4.375% and $60-a-month savings have been real? Possibly. Were we willing to gamble and put months of jockeying for a good rate on the line? No.
A day later we were back at the title company, signing for the 4.75% rate, a savings of $21 a month, or $7,560 over the life of the loan. Did we feel good about the whole ordeal? You betcha.
Related reading:
Refinancing made easy: Our story
4 reasons not to refinance
What’s ahead for mortgages in 2009Mortgage trouble? New government Web site can help
