HARP refinance?

Archived From: Finance
  • Page :
  • 1
  • Text Only
Voting History
rated:
Just got contacted by the holder of my mortgage. They are offering me a simplified refi under Obama's HARP program (so they say). I understand this program is supposed to help underwater folks refinance easily, but my loan is not underwater. Loan balance is about $168K, market value somewhere over $600K. Anyway, I'm halfway through a 20 year mortgage at 5.5%. They are offering a simplified refi to a new 10 year loan at 4%. Closing costs of about $3500 would be rolled into the loan so nothing out of pocket. My payment will go down $53 a month, ending at the same time as my existing loan. No documentation, just proof of insurance and verification that I'm currently employed. Is this a good idea?

Member Summary
Depends on your time horizon. If you happen to sell the house, say a year from now, you will be stuck with a higher principal balance (thanks to the 3.5k costs rolled in) and your $53/mo savings would hardly make up for it. You can use a refi calculator to see where the break even point is. My guess is it is a few years (probably less than 5). Closing costs seem pretty high --- have you shopped around for better refi offers?
Thanks for visiting FatWallet.com. Join for free to remove this ad.

RBirns said:   Just got contacted by the holder of my mortgage. They are offering me a simplified refi under Obama's HARP program (so they say). I understand this program is supposed to help underwater folks refinance easily, but my loan is not underwater. Loan balance is about $168K, market value somewhere over $600K. Anyway, I'm halfway through a 20 year mortgage at 5.5%. They are offering a simplified refi to a new 10 year loan at 4%. Closing costs of about $3500 would be rolled into the loan so nothing out of pocket. My payment will go down $53 a month, ending at the same time as my existing loan. No documentation, just proof of insurance and verification that I'm currently employed. Is this a good idea?
Depends on your time horizon. If you happen to sell the house, say a year from now, you will be stuck with a higher principal balance (thanks to the 3.5k costs rolled in) and your $53/mo savings would hardly make up for it. You can use a refi calculator to see where the break even point is. My guess is it is a few years (probably less than 5). Closing costs seem pretty high --- have you shopped around for better refi offers?

You might save more with Penfed 5/5 ARM

fwuser12 said:   
RBirns said:   Just got contacted by the holder of my mortgage. They are offering me a simplified refi under Obama's HARP program (so they say). I understand this program is supposed to help underwater folks refinance easily, but my loan is not underwater. Loan balance is about $168K, market value somewhere over $600K. Anyway, I'm halfway through a 20 year mortgage at 5.5%. They are offering a simplified refi to a new 10 year loan at 4%. Closing costs of about $3500 would be rolled into the loan so nothing out of pocket. My payment will go down $53 a month, ending at the same time as my existing loan. No documentation, just proof of insurance and verification that I'm currently employed. Is this a good idea?
Depends on your time horizon. If you happen to sell the house, say a year from now, you will be stuck with a higher principal balance (thanks to the 3.5k costs rolled in) and your $53/mo savings would hardly make up for it. You can use a refi calculator to see where the break even point is. My guess is it is a few years (probably less than 5). Closing costs seem pretty high --- have you shopped around for better refi offers?


You never know, but I have no plans on selling. Time horizon will likely be at least the entire term of the loan. I have not shopped for other refi offers. My lender called me. As far as I know, $3500 is not high at all for closing costs in my area (Nassau County, NY).

It would take 66 months to make the refi worth it.

I will second the Penfed 5/5 ARM.

Isn't the Pended 5/5 a 30 year loan? Why consider an ARM when rates are so low? Besides, I don't even think I can join Penfed.

Need to know what makes up the $3500 in closing costs. If part of it represents escrows for next year's taxes/ insurance and prepaid interest, then that part is not really costing you. (you would have to pay for those even if you did not refi). The payback period on the refi would be sooner if those are included. Only look at the lender and title co. fees to analyze whether it is worth it. Also it is important to know if there are discount points in the closing costs. The discount points can typically be reduced in exchange for a higher loan rate.

Looking at the payment savings is not exactly the best way to analyze it either. Another way to look at it is you are saving 1.5% (5.5-4.0) interest per year on a $168K balance. This would be approx 2520 the first year or 210/mo savings, declining as the loan is paid. (an amortization schedule would give an exact amount).

4% seems high for a 10 year fixed loan. Going rate for that is around 3.25% with normal costs. Unless there is some issue that would derail the refi if you had to submit full documentation, shop around.

I would also recommend the 5/5 ARM in your situation. No closing costs. It is based on a 30 year payback, but you can pay more to pay it off over a 10 year period. That way, you will only have one rate reset at the 5 year mark which can only rise by 2% over the starting rate. The loan balance should be so low by then, it will not be significant increase.

There is no escrow. I pay taxes and insurance directly. The $3500 is an assortment of lender and title fees, no points.

This Penfed thing has no closing costs?

RBirns said:   Besides, I don't even think I can join Penfed.

Anyone can join penfed. Look at the last item under "join penfed" at penfed.org

RBirns said:   There is no escrow. I pay taxes and insurance directly. The $3500 is an assortment of lender and title fees, no points.

This Penfed thing has no closing costs?

No closing costs. Read the fine print for more details. The 5/5 ARM is pretty much on the front page at penfed.org.

I'd shop around. For a similar loan refi, Amerisave is quoting 3.5% for 10 year fixed loans and they'll kick in about $1500 credit towards closing. Now if your county/state runs higher on costs then maybe the $3500 closing isn't a bad deal but still 4% with $3500 closing doesn't seem very competitive.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014