Refi deal question - scam?

[widebody911]

My mortgage company called today with a refi deal, and it sounds suspicious, but I can't find the catch.

Here's the deal: I can refi with either a 30 or 20 year mortgage, no closing costs, no fees, no appraisal (but I bet they've run comps on the 'net, and they know about the new shop), no credit check (but I'll bet they already ran one); I don't even have to do a formal closing. They do have close my escrow account and open a new one; they cut me a check for the old balance and start me a new one. My rate would drop from 6.5% to 6.0%; the 30 year would save me roughly $90 a month, the 20 would be ~$100 more a month. My principal is ~$148k. The only other house in my 'hood whose comp I know sold for $359k

So what's the catch? The nice lady on the phone told me they're trying to prevent good customers like myself (high FICO, perfect payment history, decent income, hung like a Shetland) from refi'ing with someone else.

Is this BS? Am I missing something? What other questions should I be asking? If it sounds too good to be true...

[Moses]

These loans come up from time to time and carry a generous commission to the broker from the lender. They push them hard and they disappear quickly.

Make sure the actual lender is reputable.

[widebody911]

It's the same lender I'm with now (Washington Mutual)

I agree with the pushing hard - she called 3 times in 3 days.

[304065]

How often can your current rate adjust, and how often can the new rate adjust? You gonna swap a 6.5% fixed for a 6.0% variable?

[Moses]

Originally posted by widebody911
It's the same lender I'm with now (Washington Mutual)

I agree with the pushing hard - she called 3 times in 3 days.

If it's not a broker, then Wash. Mutual is offering an internal commission. Probably WM sold some long term bonds and need to get the money out. I'd jump on it if the loan terms are the same. (No call or resale options)

[widebody911]

6.0 fixed Don't know what 'call or resale options' are.

[Neilk]

Well if they are trying to keep you from jumping ship, perhaps there IS a much better fixed rate loan out there.

[widebody911]

Originally posted by Neilk
Well if they are trying to keep you from jumping ship, perhaps there IS a much better fixed rate loan out there.

That occured to me as well. I haven't been shopping. I missed out on 5.25% a year or so ago; I gambled that I could get 5.125% right when rates headed north. I figured if I couldn't lop a full 1% or better, it wasn't worth the hassle.

[white87911]

Well, since I am a Real Estate Appraiser, I do have a inside look at some of these deals. What you need to look out for is that thaye say "no fees" - "no cost" but what they really do mean is that they bump up your mortgage amout to cover their costs. For example:

If you own $200,000 on you mortgage, they will do the refi at a amount of sometinthing like $206,000. They take the $6,000, but since it is at a lower rate over 30 years, you still get a lower ontly preimium. BUT. Right now you may only have 25 years left, and if you then pay $80 to $100 dollars less, big deal, the addition 5 years could cost you $1,200 per year or $6,000 over the life of the loan, the guess what, you are back to square 1.

The only way you would benefit is go to the lower rate and overpay your principal (as long as there is no pre-paypenaty). If you were to contine to pay the extra $100 per month you could shorten the life of the loan and make out on the deal.

.5 percent is not a big deal, and if it is adjustable then you may wind up on the loosing end. As it will go up with the way the economy is heading.

The best thing you can do is wait until you have a low enough mortgage amount to go to a low rate 15 year loan and pay it off, therefore you save a ton in interest payments.

Erik

[island911]

WAMU is very reputable IMO.

How far into the current loan are ya? To "save" money (pmt) you will be 'resetting" the loan to 30 years. For only a half point . . hmmm. That will cost ya in the long run.

I would ask if there truely are no closing costs, no fees, no appraisal . . . or if they are just rolled into what you will owe.

[island911]

Originally posted by white87911
. ..
.5 percent is not a big deal, and if it is adjustable. . .

On man! . .their not trying to get you into an 30-ARM with only a half-point carrot . . are they?

[widebody911]

Originally posted by island911
On man! . .their not trying to get you into an 30-ARM with only a half-point carrot . . are they?

No - I was born at night, but it was last night! This is a fixed-rate deal. I called back and left a message about the costs being tucked into the principal. Haven't heard back yet.

[white87911]

I thought SO,
Get all the info and post it or email it to me directly and I will tell you my thoughts.
Generally speaking to refi at te same term i.e. 30 years you need to drop 1% for it to be worth our wild.
There is always hidden fees, i.e. appraisal, title, credit, notary, etc. even if you do not write a check you can still pay for it in the long run.

[Moses]

Originally posted by widebody911
6.0 fixed Don't know what 'call or resale options' are.

There was a story in the newspaper here last year about someone who got a great refi deal. A year later, his loan was "sold" to another bank. That bank called the loan in, demanding immediate payment of the entire balance. He was forced to do more mortgage shopping.

Apparently some loans have an instant "call" option for the lender.

[island911]

That hasn't been WaMu's history . . .selling loans. Though times do change.

[lendaddy]

The new one probably has an "early repayment penalty", as the banks are trying to cover their asses for giving away the moon when things were competative.