Lowest Mortgage Refinance Rate Comparison by the Readers!

by Darwin on February 19, 2009

After perusing the web for the best mortgage refinance deal out there, it’s evident that the rates, points and fees required by different lending outfits are all over the map.  Even worse, in corresponding with some loan officers on a refinance that I’m considering, I’ve found the practices to be rather deceptive (didn’t we learn from recent history? – more on that later).  I have yet to actually come across a single repository of the best rates for either a new mortgage or refinancing.  Therefore, I’m going to kick it off here. I’m going to post some refinance data I’ve come up with during my research and I’ll ask that readers report here on their findings.  After enough entries, I’ll go back and research the best companies in real time and do a new post since rates are subject to change.  Directionally, you’d think that the best deal today will still be a good deal in a week or two, comparatively speaking.

UPDATE: Check out 40 and 50 Year Loans as well – I never even knew these existed! Monthly payments are MUCH lower.

I’ll Start:

CountryWide:

  • Interest Rate 5.00%
  • Mortgage Term – 30 yr
  • Points Paid – 2 points
  • Total Other Fees – $2205
  • Analysis:  This one doesn’t look so attractive when considering two points.  That’s effectively paying well over $10,000 in total closing fees for me.

    Bank of America

  • Interest Rate 4.75%
  • Mortgage Term – 30 yr
  • Points Paid – 1.875 points
  • Total Other Fees – $6219
  • Analysis:  This is ridiculous.  The site touts a “no out-of-pocket cost option”, etc., but it’s really just rolling exhorbitant costs into your mortgage.

    Enough is Enough – Let’s hear about your best deal!

    List your recent Refinance deals or research in the following order:

    • Interest Rate
    • Mortgage Term
    • Points Paid (especially interested in zero and 1 point options to baseline this analysis)
    • Total Other Fees (exclude escrow items, but include all title, appraisal, processing fees, etc.)
    • Source!  Don’t forget to list the company or link

    Now, It’s Your Turn!

    Some extra considerations:

    • Good Faith Estimate: Make sure you pester the loan officer for a formal Good Faith Estimate.  If you don’t see a fee on a line that you’d expect to see one, ask if they can confirm there’s no fee for that entry.  For instance, my first GFE had nothing for title, which is normally a pretty big fee (I had refinanced twice before in the early 2000’s).  He eventually came back and said it was “an oversight” and added in that fee and another.  Imagine my frustration at closing to find out I owed an extra $1000 in fees!
    • Perform a Break-Even or NPV Analysis: You’ll want to understand how long it will take to pay off the fees you’re going to incur as a result of this refinance.  It’s a simple excel exercise in which you divide your total fees by your savings per month.  In my examples, I’m anywhere between 20-40 months on my payback.  If you want to get fancy (which I did), factor in the effective savings by considering the lower interest deduction and any other factors that slightly impact the model.  Of course, if you’re considering moving, don’t bother.  You want to be 95% sure you’re going to remain in your home to at least recoup your investment (nothing in life is 100%).
    • Pay-Back Period isn’t Everything! You’ll want to compare apples to apples though. You may have a mortgage with a shorter payback period that isn’t the best for you long term though.  If you have a 20 month payback at 4.75% and a 25 month payback with a 4.5% rate, over several years, that lower interest rate is going to save you tens of thousands on a decent sized mortgage.  Even in present day dollars, you’re much better off going with the lower rate if the the payback period is only a difference of a few months.  Included here is a link to a Net Present Value Analysis that takes this one step further and allows you to assess the true value in present day dollars that you’re realizing by going with a particular deal – especially useful in comparing multiple options.
    • Research, Research, Research – That extra hour you spent looking for the lowest rate can end up saving you several hundred dollars per year for 30 years!  But hopefully, the research here will save you the trouble!

    Please, help our readers to beat the maze of deception here and save everyone some time.  Let’s get to the point.  For a given mortgage, where is the first place to go?

    Again,

  • Interest Rate
  • Mortgage Term
  • Points Paid (especially interested in zero and 1 point options to baseline this analysis)
  • Total Other Fees (exclude escrow items, but include all title, appraisal, processing fees, etc.)
  • Source!  Don’t forget to list the company or link
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    { 6 comments… read them below or add one }

    1 RandomLeeKind February 19, 2009 at 11:40 pm

    This is not a bad idea but it is actually a lot tougher to do now that the GSEs have implemented Loan Level Price Adjustments and with differences between agency and non agency options. To be clear. THE RATE YOU FIND ONLINE WILL NOT BE “YOUR” RATE. Rates are determined by loan amount, property type, credit score, loan to value among other factors. Also, the current rate environment has lead to mid-day price adjustments 75% of the time last quarter. The current refi boom has caused banks to also manage pipelines with pricing, so the rate leader one day will most likely not be the same one the next day.

    I understand your frustration. The credit market has become a mine field for consumers. I’ve been in the business since 1988 and have never seen this level of chaos. I suggest you find a mortgage broker you trust or visit a smaller community bank or credit union.

    Do so soon. Mortgage Backed Securities are bumping up against 3 levels of resistance (50 day moving average) and stocks may soon recover causing money to leave the bond market. Waiting for that extra quarter point could cost you huge.

    [Reply]

    2 Tad February 20, 2009 at 1:42 pm

    Closed yesterday on a 220k 80% LTV cash-out refi.
    rate: 4.75% fixed
    Term: 30 years
    points:technically zero, although they inflated the Broker fee(808) to 1.25%.
    fees: 6153 including loan, title and gov fees.

    [Reply]

    3 Dallas March 16, 2009 at 11:00 pm

    Got GFE from Aasent Mortgage
    4.875%
    30Yr term
    1.0% Origination Fee
    $2300 in other fees
    $242K loan, with 80% LTV

    [Reply]

    4 Fit Wallet April 1, 2009 at 7:07 am

    Here’s what I’m getting from BofA:
    4.625% interest, 30 year fixed
    1 point @ $1,736
    Other fees: $3,255 (title insurance, appraisal, application fee, escrow settlement fee)

    That’s if the house appraises high. If not, I will get this instead:
    4.625%, 30 year fixed
    0.75 point @ $1,300
    Other fees: $3,255

    I should recoup the costs within 40 months…not too bad. I comparison shopped quite a bit, but couldn’t beat their interest rate. They service my mortgage currently, so it was also a lot easier in terms of paperwork. I just called the officer who processed our mortgage when we bought the place 2 years ago.

    [Reply]

    5 T April 4, 2009 at 1:08 pm

    What I received at WF:
    $200k w/ 80% LTV
    5.0% 30y fixed (1/8th above advertised rate)
    Zero points
    Other fees: Total “cost” was ~$1000
    Note: Includes $300 deduction for having a checking acct, and cash out of pocket (or out of the loan in this case) was higher, mainly due to timing, escrow deposit, etc., but overall cost was $1000 (included appraisal, title, blah blah blah).

    [Reply]

    6 Mortgage Man June 20, 2009 at 1:24 am

    Very nice. Thanks for this.

    [Reply]

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