No. of Recommendations: 9
(Crossposted to "Buying/Selling a Home")

Well, I guess I meant to do it – but “refinance the mortgage” was not on my list of things to do today. It just sort of happened…

Long story - I just got back from vacation last week and logged on to my credit union account today to catch up. While I was there I figured I'd check their published mortgage rates. I've been keeping an eye on them as I've been meaning to refi for a while (currently 39 months into a 95% LTV, 2yr ARM with the CU with $130K left at 6.5% - not great for an ARM now but lower than it was at first and we had only put 5% down.)

Why haven't I refinanced sooner? Several reasons I won't go into here.

Anyway, I looked at the CU rates online. Holy cr@p!! All their 2yr, 90% LTV ARM's dropped to 3.75% while I was on vacation. (Maybe this isn't news to you guys but I haven't kept up closely in the last few weeks.)

Now, my credit union has what they call a “Mortgage Modification Program”. A clip from their web site sums it up better than I can:
Do you have an existing 2-Year or 5-Year Adjustable Rate Mortgage with the Credit Union? Would you like to refinance to the current new loan rate but do not want to have to pay closing costs? The Credit Union has a solution for you, our Mortgage Modification program.
This program allows you to modify the interest rate on your existing 2 or 5-Year ARM to the current beginning interest rate for loans having the same margin without having to go through the entire refinance process, saving both time and money. Because a loan closing is not required, you will not have to pay closing costs. The only cost associated with the modification will be a one time processing fee of .75% of the outstanding loan balance. The Credit Union will modify your interest rate to the current beginning rate.

Well, I had always thought this wouldn't help me out. Notice the catch, “rate for loans having the same margin”. Meaning, since I had taken out a loan at 95% LTV, I could use this program to adjust my mortgage to the current 95%, 2yr ARM rate (currently 4.75%), not to the 90% LTV, 2yr ARM rate (3.75%). I even called the phone center to confirm this once a few months ago. I was told my understanding was correct. I could, of course, do a full refi though and get the 90% LTV rate.

Now, either my phrasing of the question was incorrect, or the phone center guy didn't understand the question, or he didn't know the answer so told me the wrong thing, or they've changed their policy on this. I accidentally discovered this today.

But, back to when I was looking at online rates… I was still surprised with the new rate and was getting ready to get my paperwork together to go down to the CU, like, tomorrow to start a full refinance process with them. Just for kicks I called the phone center to see what the current 30yr fixed rate was (they publish the ARM's but not the fixed.) Here's how my conversation went:

CSR: The current 30-yr fixed rate is, hold on, let me look it up… 5.625%

Me: Okay, thank you very much (getting ready to hang up)

CSR: But, you know… We just dropped the rates on some of our ARM's to 3.75% so don't overlook that product...

Me: Yep, I saw that. That's what got me looking at rates today. I was just curious where your fixed rates were at and trying to compare things…

CSR: Yeah, that 3.75 is pretty low and if you're thinking about an ARM at all…

Me: Actually, I already have a 2yr ARM with you and am thinking of refinancing.

CSR: Oh, that's great! Well, you know we have this thing called the Mortgage Modification Program where, for a .75% fee we just re-adjust your existing mortgage to reflect the current rate and there's almost no paperwork, no hassle…

Me: Yes, I've heard of that. But, unfortunately my original mortgage is at the 95% LTV and the 3.75% rate is for the 90% LTV loan. I didn't think the MMP would allow that kind of modification.

CSR: Oh, no, we can do that for you. Assuming you have paid down the mortgage to less than 90% of the original appraisal value.

{We have done that. We're at about 13% equity based on the original appraisal, probably over 25% if a new appraisal were done.}

Me: You're kidding. I can do the Mortgage Modification Program, and get the 3.75 rate?

CSR: Sure thing. Now there is a fee of .75% - that comes to … $970. And you can either pay that or roll it into the new mortgage…

So, about 5 more minutes on the phone with this guy and I've refinanced my mortgage! Well, he still has to send me a form to sign and send back, and the whole thing has to be processed… But still! I'm so excited. It took 10 minutes to do, cost under $1K (which will be recouped in 4 months at the new rate), was totally hassle-free and my mortage will be at 3.75%!

LBYM tie-in: That will be a savings of about $250 per month!

(sorry this got so long)
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