Tuesday, May 12, 2009

We're just doing our patriotic duty.

That's right... Obama said go forth and refinance, so that's what we're doing.

Granted we've only been in the house two years this July, but the low rates were too much to resist. Two years ago we got in right before the no money down party ended, and we're finding that is really limiting our options now, but no worries. Our mortgage broker from before found us something that will work.

Now, I have to tout City National Bank for a minute. They had a great loan product for first-time homebuyers called a "Champion Mortgage." 100% financing and $695 closing costs. That's right, $695. Period. That includes your appraisal. Yes, it was an ARM, and we all know how much bad press ARMs got as the housing bubble burst. But our mortgage broker helped us to not fear the ARM. They can work if you are responsible and know what you're getting into. It's funny when I tell people I have an ARM loan. Do you remember the Sex and the City episode with Heather Graham? The one where Carrie ran into the chic who dated Aiden right after she broke up with him? I get that face when I tell people I have an ARM.

Any ho, our ARM was a 10 year arm. Just refinance it within 10 years. No biggie. As interest rates fell, I started calling around to see how good of a deal I could get. At least the lady at Chase was honest when she said to check with City National because she couldn't give us that great of a deal.

I called City National on April 27th about 2 pm and spoke to our original mortgage officer. She quoted me a pretty good rate for refinancing into another Champion Mortgage ARM, but said no bank could refinance a mortgage into a 30-year fixed with less than 5% equity given the current state of the banking industry. No one is going to do it. I told her I'd talk to Jeremy about it and get back with her the next day. Well, at 3 pm, she got an email from the corporate HQ saying that beginning the next day they were discountinuing the Champion Mortgage program because of the "high loan to value ratio of the loans." Evidently, they are getting some heat from regulators. Anyhow, I talked to Jeremy and he thought it sounded like a good deal, so I call her back that day... It's a good thing I did, or we would have been out of luck. She did our application over the phone that afternoon, so she could get it in before it was too late.

So, I ran the numbers on moneychimp dot com (awesome site for figuring stuff out like car payments, amortizing loans, etc, BTW). We should hit 5% equity by the fall of 2011, so then we'll be eligible for a 30-year fixed mortgage. And with the new lower rate, we'll save almost $200/month on the payment. Is it wrong to have already spent that money? Probably. We haven't closed yet.

But I'm pricing hardwood floors and a new front door.


Erinn said...

So how does that work? You do it now, but don't really start paying $200 less til 2011?

Jennelle said...

Nah, we start paying $200 less as soon as we close. We hit 5% equity in 2011. Then we can refinance again into a 30-year fixed mortgage.