On March 16, the Fed announced it would stop buying mortgage-backed securities effective March 31. Instead of going up, the mortgage rates reached a new low on the next day. As a result, I’m doing another no-cost refinance to lower my rate by a quarter of a percentage point. I think this really will be my last refinance.
I’ve been following a step-down-the-ladder approach for mortgage refinancing. Whenever I can lower my rate for at least 0.25% with no closing cost (credit from the lender covers closing cost), I would do it because I have nothing to lose. Every time I do it, I save hundreds of dollars a year, every year.
The Fed purchased $1.25 trillion in mortgage-backed securities. The purchase has kept the mortgage rates low. When the life support is withdrawn, the rates won’t necessarily jump up immediately, but I don’t see how the rates will be lower without the support than with the support.
I’m going with the same lender I used last year: National Mortgage Alliance (NMA). I like NMA because their rates and fees are the best I can find for my loan. They also show a transparent trade-off between rates and fees on their website. For example, at the time I’m writing this, NMA shows these for a hypothetical $150k 30-year fixed loan for a home valued at $200k in Missouri:
| Rate | Payment | Lender Fee | Closing Cost | Lender Fee + Closing Cost |
| 5.250% | $828.31 | -$1,738 | $1,311 | -$407 |
| 5.125% | $816.73 | -$231 | $1,311 | $1,080 |
| 5.000% | $805.23 | $367 | $1,311 | $1,678 |
It makes it very easy to compare against offers from other lenders. You either find the same rate and compare the fees or find a similar fee and compare the rates.
I locked my rate at 4.25% with no point and no closing cost for 15-year fixed. With the lessons I learned from last year, I was able to get the automated underwriting system to waive the appraisal. That will save a lot of time and some money.
The refi is scheduled to close by March 31. If it does, it will be one of the fastest closing I’ve ever had.
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MD says
Please can you list all the mortgage rates you have had in the past? I am wonderig if it makes sense for me to refi.
Harry Sit says
MD – Just curious, how would my rates in the past help you? You decide if it makes sense based on your current rate and the rates you can get *now*.
md says
TFB – Nothing personal – I am just trying to know what were the steppings you took to get to this rate. I am wondering if there is much prudence to keep refinancing and extending the life of the loan to reduce payment – meanwhile giving away lot of money in interest payments.
I am already at 4.5% for 30 Yr (1/2 Pt paid in mar 2010 Refi).
Harry Sit says
md – I said I’ve been taking 0.25% steps (2nd paragraph in the post). My goal is to reduce interest, not to reduce payment. I have a set date on which I plan to pay off my mortgage. It’s calculated from the date I got my first loan. When that date comes, I will pay it off. The life of the loan is not extended. 4.5% for 30-year is a great rate.
LM says
TFB – I own an apartment free and clear in NYC. I dont carry any debt except for my wife’s student loans. Rates on those loans range from 3%-6.8%. I would like to borrow against my home to a) pay down her high interest student loans while paying the min on the low IR ones and b) provide an additional hedge against future inflation which I believe to be on the horizon. I have impeccable credit for my age (low 30s) and was hoping you could point me in the right direction.
The apartment is worth ~420k and I am looking to borrow approx 100-150k at a fixed rate without any penalty for early repayment. I have literally never borrowed a dime in my life or carried a cc balance. Can you provide any advice?
BTW, I have read many of your posts on the Boglehead’s forum and your advice on TIPS has been nothing short of phenomenal.
Thanks in advance.
LM
Harry Sit says
LM – If you don’t have a mortgage now, it would be a cash-out loan and the rate would be higher. You can call a few up-front mortgage lenders like NMA and see what they offer.
If I own my home free and clear I would keep it simple and just use any extra cash to pay down the student loan.
LM says
TFB – I called the first few lenders on that list and unfortunately they wont work with co-ops, which is what i own. Since I dont technically own the unit, but rather shares in the building, getting financing is a bit trickier.
Thank you for the reply, though
CK says
TFB – I must be missing something here when I see the only closing costs estimated at $60 (recording fees) when I enter my information. Does it truly mean that all fees are covered by the lender (appraisal, processing, title insurance, and all those other fees typically charged during closing). Seems tool good to be true. I must be missing something here…
If I really can lower my rate over .5 for no fee then I’m inclined to jump on this.
Harry Sit says
CK – No you are not missing anything. At closing, you will be asked to pay accrued interest on your current loan, prepaid interest for a partial month on your new loan, seed money for your escrow account (search for “escrow waiver” on this site for my post on that topic), and any homeowner’s insurance or property tax bill due shortly. But all those are not cost in the true sense. Appraisal, processing, and title insurance are covered by the lender.