I thought the last train for mortgage refinance left in March but the trains keep coming. Rates have gone lower and lower. I’m doing another refinance to lower my rate to 3.75% for a 15-year fixed rate loan.
This time, instead of going to my twice favorite National Mortgage Alliance (NMA), I’m using a different bank: First Internet Bank of Indiana (“First IB”). Don’t laugh; it’s a real bank (FDIC cert. # 34607). It just has a name from the dot com era because it was established during the dot com boom in 1998. It still does business primarily through the Internet without a physical branch, just like ING Direct.
The reason for going with First IB is of course its lower fees. For the same rate and term, First IB’s fees are much lower than NMA’s. I heard about First IB from the FatWallet Finance forum. Several people there posted positive experience with First IB.
I just locked my rate. The all-in closing cost comes to about $100. It’s close enough to call it a no cost refi. Even though every time it feels like the rate can’t go any lower, I’m still going with a no cost refi to preserve my option for another round down the road. Who knows, maybe someday the mortgage rate will go down to 2%.
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Paul Williams says
Nice! That $100 closing cost is great. It looks like you’re going down from 4.25% based on your last post. Normally, I think you’d want a larger spread before doing a refi but those closing costs are so low it doesn’t really matter much.
Now is a great time for anyone who has a mortgage to consider refinancing. They might not all be eligible (due to equity issues and such) but if you can do it you should spend some time looking into it.
Eric Dasta says
It would be very nice if their fee was anything close to $100. I just went to the web site and they are asking for a $670 fee. Why the huge discrepancy here? You are either badly mistaken about the fee or outright lying !
Last year I paid 2.175 points to buy down my 30 year rate to 4.375%. (I said wow, that will pay for itself in 4 years!) I feel like a doofus now that that’s the 0-point rate at the same credit union. At the time, I thought it couldn’t get any lower. (That’s what everyone thought back then.) Now 3.75% for a 15 is looking really tempting (that’s 2.4% after tax). Now I have another choice to make. (Won’t be paying any points anymore, though!)
Is that $100 inclusive of everything, including local taxes and fees (if applicable)?
Harry Sit says
@nickel – Yes, everything including local government recording fees, but excluding escrow deposit and prepaid interest.
@Eric Dasta – A lender credit for my loan offsets the $670 fee you referred to. It also pays for appraisal, title, and settlement fees.
Here is a question –
I signed a refi 3.875% rate lock with my current lender, but haven’t closed yet. And of course, the rates dropped by 0.25%.
I can now get 3.625% for the same cost, or 4.0 at no cost somewhere else. Am I tied to this lender or do I have wiggle room?
Harry Sit says
LG – I see the lock as a commitment from both sides. If the rate went up, you expect them to honor the deal. If the rate went down, they expect you to hold up to your end of the deal as well. Some lenders offer a “float down” option at the time you lock the rate, for which you have to pay a few hundred dollars. If you didn’t buy the float-down, they usually don’t let you float down for free. When you locked the rate, they also locked with their lender upstream.
Of course the lender doesn’t want to lose you as a customer. There might be some wiggle room in between. Maybe they will meet you in the middle for the rate. Or reduce your closing cost by a few hundred dollars to make you happy. It doesn’t hurt to ask. A threat to walk away is powerful, but then on the other hand, lenders are all very busy these days with plenty customers knocking on their doors. If you walk, I don’t think they are obliged to refund you the fees you already paid (the lender already paid the appraiser).
I called them and they were helpful and very professional. I get to see that less and less so I was pleased. But the minimum amount is 50K. Too bad for me. I want cry and say not fair. 😀
TFB, their closing costs are about $1300 for $280K loan on their website. So I was wondering how did you get a $100 quote.
Alright, When I change the location to California and any of the locations near San Francisco ..and choose a 416K conforming loan, the closing costs go down to $400. I see! The pricing does vary quite a bit by location and amount.
Harry Sit says
KD – Pricing also changes every day, sometimes more than once a day. It was much lower yesterday when I locked. It may go back down again on Monday, or go higher, who knows, just like the stock market.
Harry Sit says
KD – For a small loan amount under $50k, you might consider a 1-year ARM. For example PenFed offers 2.375% for the first year, then 1-year Treasury (currently @ 0.25%) plus 2.75%. With the Fed promising low rates for extended periods, your ARM will stay low for quite some time. If and when it goes up, you just pay it off. PenFed doesn’t charge lender fees and it also pays for appraisal and settlement fees. You’ll have to pay title insurance and recording fees.
Thanks, TFB. It is definitely one solid option. I really appreciate this blog. It provides a lot of valuable insight that many paid professionals won’t be able to provide.
How did you negotiate for the lender credit to cover appraisal, fees, etc? Also, any advice for securing a similar rate/closing on a conforming loan in the Washington, DC area? The 30yr fixed seems to remain relatively high; however, I have seen some interesting 5 year interest only options.
Thanks for this wonderful blog! I am an avid user of the Schwab cash back card based on your rec.
BTW, IB does not lend in Maryland (unfortunately)!
Hi TFB, how long is the lock period? 30 days or 60 days?
Harry Sit says
indexfundfan – The lock was for 30 days and the loan closed within 30 days.
I just refinance my mortgage with FIB at 4.25 from 5.9%, my closing cost in nj was around $3500 on a 134000k loan, with escrows and appraisal fee the total came to around $6400, I’ll be saving around $300 a month so in about a year I’ll recover my closing cost.
the process was pretty fast since they bill my credit card for the appraisal(10/26) to my closing (11/19) around 25 days, I think the service offer by this company is much better than Amerisave which charges you upfront to see your own credit report, there goes my 35 dollars that I’ll never get back from amerisave :((,
I’ll definitely work with FIB again if the occasion presents itself.