Refinancing With Your Current Mortgage Company

by Kevin on April 28, 2009

We’re in the midst of refinancing our first mortgage. In fact we are scheduled (again, it was delayed) tomorrow. I thought I would write out a few posts explaining what we are going through in hopes that it might help one of my readers down the line some day.

Why We are Refinancing Our Mortgage

We just bought this house a year and a half ago. Why would we even consider refinancing? Isn’t that what people do when they want to pull cash out of their equity?

We’re refinancing because the financial crisis has forced rates down to historical lows. We bought pretty much near the peak of the real estate bubble. By refinancing we will be saving 1.625%.

In case you didn’t know, 1.625% on a mortgage is a huge savings in interest. That’s the only reason we are doing this. Our loan balance is going to stay roughly the same, and we are going to apply the difference in payments (the savings we’re getting) to the second mortgage. We’re sacrificing some other things, too, and should have the second mortgage paid off in two years.

Always Try to Refinance with Your Current Mortgage Company

This is an absolute must. We’re going back with the same lender that originally lent us money to buy the house.

We did this for a few simple reasons:

  • we are familiar with them
  • we can negotiate on closing costs
  • they were equally competitive on rates as other firms

The second point is key. We just closed 1.5 years ago. Some of the closing costs that you would typically incur (and that we did incur originally) can be negotiated away because you’ve got the relationship with the company. I’ll write on this in more detail tomorrow, so come back for a more lengthy explanation.

On top of that we aren’t sacrificing long term interest costs by going with the same firm. Our lender had rates that were in line with other lenders — so we get to save on closing costs without sacrificing ourselves to a higher interest rate.

We’re scheduled to close tomorrow afternoon. Hopefully I’ll have a post up Thursday morning celebrating the fact that we are officially refinanced rather than complaining that it was delayed again!

Comments on this entry are closed.