How low can the rate go???
UPDATE: If you are looking to refinance, be sure to keep an eye on the National Foreclosure Settlement. It should be rolling out soon and you might be able to get a good deal. The qualifications are different than HARP 2.0 so you need to see which one you qualify for.
It’s amazing, but mortgage interest rates keep dropping. If you are stuck with a higher rate, now is the time to refinance. The Home Affordable Refinance Program has been revamped to include more home owners and many more people should qualify for refinancing. I called around and see if we could refinance under this program and while we could, the numbers are not working out.
First let’s go over HARP 2.0
- The mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. You can check if they own your loan by following the links.
- The current mortgage must be closed before June 1st, 2009.
- No underwater limit. Under the previous program, the home loan to value (LTV) ratio must be under 125%.
- The loan must be current with good payment history over the past 12 months.
- Eliminating appraisal and underwriting so home owners do not have to pay those fees. I will have to check on this with the bank.
- If you don’t pay PMI (mortgage insurance) now, then you won’t have to pay PMI after refinancing.
I verified that our loan is owned or guaranteed by Fannie Mae so we qualified for HARP. Both of our credit ratings are excellent and we don’t have any consumer debt. Our home’s value is about the same as the loan amount right now since the price dropped so much. We are not paying PMI at this time and won’t have to pay PMI if we refinance under HARP. Our mortgage is currently a 30 year fixed rate mortgage @4.75%.
I called CHASE and after 30 minutes I got the bad news. The best they can offer us is a 30 year fixed rate mortgage @4.625%. The only thing we have to pay out of pocket is the $400 application fee. However, the refinance will cost $3,000, but they will roll that into the principle so we won’t have to pay out of pocket. I was a speechless after I heard this offer. Seriously? A 0.125% saving? That is pathetic. I see most 30 year mortgages are now at less than 4% interest rate.
I checked online and most lenders are not participating in the HARP because it is voluntary. With LTV of around 100%, the lenders do not want to take the risk. The banks who are willing to take the risk charge more points and fees and makes the loans not worth refinancing. I’ll call a few more places and see if I can get a better deal, but I am not optimistic. All the loan officers are inundated with people trying to refinance so they don’t even call back. I’ll probably have to drop by and make an appointment.
If we can refinance at around 4% with minimum out-of-pocket fee, then it would be worth it. Otherwise, we’ll just have to keep our 4.75% mortgage. Alternatively, I can put our $50,000 reserve fund into the loan and get it under 80%. This should make it easy to get the best rate and points. That is our emergency fund and I really think it is a bad idea to throw this into the mortgage. We don’t even know if the home price will start to recover in 2012.
Have you refinanced under HARP? Were you able to get a good rate? Which bank should I talk to?
{ 58 comments… read them below or add one }
My family is in the mortgage business and you are exactly right that banks aren’t participating. Honestly I don’t think many people are going through with the HARP program because the push down fees from Fannie are too high for banks to justify the business. I would just go after a traditional refinance if you have some value and forget about the HARP program all together.
Our LTV is about 100%. We don’t have any equity because the price came down so much. If I can get a regular mortgage, I would have to pay PMI and that would make the payment go up again. If you have any recommendation on a particular mortgage broker, please share.
I’ll continue to search for a good option. Thanks for your comment.
Am I missing something? What is the point of this program if the banks aren’t choosing to cooperate?
I think the big banks are offering the programs, but they added on points and fees so it’s not worth it if your rate is not too bad. I don’t think the smaller lenders are taking chances.
It would be a lot better if the government makes the bank offer a better rate. We did bailed them out!
I know a couple in your position whose loan is serviced by Chase. Chase sent them an unsolicited letter, offering to refinance at a similarly above market rate with lower fees. Although the loans are owned by Fannie, the servicers apparently being allowed to charge whatever they want in fees and rates. In my friends’ case, they were at 6 percent, so they decided to do it.
For reference, I am looking to refinance my primary residence with 50 percent equity. I use a broker I have used for 10 years and he shops the loan to all the major lenders. The best 30 year fixed rate on Friday was 3.875 percent with no points. There was no upcharge to lock the rate for 30 days. However, because that 0.5 percent upcharge on Fannie loans is about to kick in (the upcharge that is supposedly financing the payroll tax holiday), the 45 day lock is an additional 0.5 percent.
Mortgages should always be comparison shopped. My broker is routinely lower than the retail rate you get when you walk through the door of your local bank in both rate and fees. There are good brokers and bad brokers out there. Ask around among your real estate-savvy friends for referrals.
I need to find a good mortgage broker. I’ll ask around and see if I can get any recommendation. The problem with our mortgage is the falling price. We have 0 equity right now so can’t get any regular loans. I don’t want to refinance if we have to pay PMI either.
Thanks for your input. 3.875 is pretty good. I’ll have to read up on the .5% upcharge from Fannie Mae.
From the timing (2007) and your numbers, it looks like you bought your house for around $325,000 with an 80 percent mortgage of around $260,000. If that’s the case, your principal and interest payment is around $1,344. If you threw the $50,000 in and got a rate of 3.875 percent, your payment would drop to around $940.
In your shoes, I might consider doing that IF I had some reserves left and I could rebuild the $50,000 fairly quickly. I would have to be comfortable taking a risk on repairs and maintenance on the rentals until I had replaced my reserves. Then I would throw everything at the cash reserves until I had $100,000.
I don’t think that’s a good use of the $50,000. Anyway, I know the Mrs. will disagree with this.
The 0.5% upcharge has taken place but what that means is that it costs 0.50 points to get the same rate today that you would have gotten yesterday without the fee. If you translate it into the interest rate it typically equals about a 0.125% increase to the interest rate in order to avoid the points. Hope that makes sense.
I’m sorry to hear that you didn’t qualify for a lower rate. What they offered is certainly discouraging given what is being advertised. Additionally, it sucks that you had to pay $400 just to find out the refinanced rate is not much lower and will cost you $3000 to do the deal. Ironically, it is kind of cool that I’m complaining about a mortgage rate that is less than 5%. What I am saying is that overall, these artificially low mortgage rates are awesome relative to what they have been in the past.
Anyway, I feel you pain and would not want to eliminate my EF either.
We didn’t pay the application fee yet. At least they gave us the rate before we applied. Many places just want to pull our credit even before giving a rate. I say no those guys. Heh heh, that’s true about the 5%. Our rate of 4.75% is already better than what we have ever seen. I guess I am a complainer at heart.
We are on the same boat as you are. Our current mortgage rate is 4.75 as well. I haven’t started shopping for a refinance rate , but soon will.
That’s too bad they didn’t play ball, but you aren’t in too bad a shape at 4.75%. What’s the break-even with $3,000 rolled into the loan @ 4.625%?
I haven’t calculated it out, but I’m sure it will take at least 3 years.
4.75% is still pretty awesome! Even if you can’t get much lower, that’s still nothing to be depressed about!
I don’t know the details of your house but putting a portion of your emergency fund might not be a bad idea if the payback period was reasonable. Given that your fund is 50k or so, you could take a portion of it and see how long it would take to recoup that portion out of the lower payments you would be making. Having lower expenses when you go into retirement will make it a LOT easier to STAY in retirement if something does happen.
I just hate leaving anything on the table.
If I put 50k in and lower the payment… It will probably take almost 10 years to recoup that with the smaller payments. It’s not a good use of that fund.
RB40, you would get a better rate even without HARP. Try other lenders as well.
Since the LTV is around 100%. I can’t get a regular mortgage.
RB40, MoneyCone is right. I am in the same boat as you where my LTV is around 100%. However, I was offered a refinance with 4.2% by a reputable, small mortgage business in the area. I too had no luck with the big boys like Chase, etc. Maybe try calling a few of the smaller outfits. I start my refinance process this Friday. Fingers crossed on that official appraisal!
I’ll try to find some smaller outfits. It seems most of the smaller places are not willing to lend. Do you have to pay PMI with this refinance? That’s one of the sticking point for us.
Thats a shame that this program is basically useless for the people it was designed for. I feel like i’m in for a sharp learning curve when I buy a house
“this program is basically useless for the people it was designed for.” Often the case! I’m still a firm believer we are in for another correction up in the great white north. To me the housing market is too much of a crap shoot right now.
I tried refinancing, but my mortgage is so small it did not make sense. I was even willing to take a 5 year ARM at 2.99% because I could pay off my mortgage in less time than that. I am glad I do not need the refinance.
Yeah, you can just pay it off if you want.
I had the feeling that people jump in to get you refinance. Don’t know what’s LTV though. Hope to learn all in time.
LTV is loan to value. How much you owe on the place divide by the value of the home. Since the value came down so much, many people LTV are way above 80%. I think 80% is the level that will get you the best rates, but I’m not exactly sure.
It’s a shame they wouldn’t lower your rate more than .165%, however, 4.75 is nothing to sneeze at. Still a good rate.
I’ll check around with other banks. I think I can get it down to 4.25%, but that is still border line.
I called Navy Federal Credit Union. They wanted 5.25% refi with my 160 %underwater ratio. Harp 2 is supposed to allow underwater mortgagees to take advantage of todays low rates (3.88%). Told Navy Federal “no thanks”. Understand President Obama is going to announce some changes to HARP 2 before the end of January. Will wait to see what he does.
That rate sucks! OK, thanks for the heads up. I’ll keep an eye out for President Obama’s announcement. Maybe that will help all of us.
I didn’t know the specifics of the program. Thanks for the update. I like the fact that underwater limits are gone. Stinks that more banks don’t participate, but I totally understand why. Would you participate if you owned a bank?
Of course I would participate. I would be grateful to the tax payers for bailing me out and by refinancing the bank gets refinance fee AND a better chance of getting paid. Home owner with underwater loans does not really want to pay mortgage and are looking for any excuse to skip out.
I am surprised you didn’t get a better rate in this environment. It is disappointing that banks do not participate in this program as much as they actually should! I guess banks are being well… banks.
Hi, I’m a mortgage lender and I think you may still have a chance. My understanding is that the big banks (Chase, BofA, Wells, etc.) have access to the new HARP guidelines already. For most of the other lenders and brokers out there we will not be able to offer the program until March. Fannie Mae and Freddie Mac are updating their automated underwriting systems to accommodate the new changes. I have spoken to a couple of Bank of America loan officers and there is a chance that they are simply taking applications at this point also and that the terms you were offered were under the old HARP guidelines. My advice would be to check in March with a broker or direct lender to see what they can do. Typically you will be able to find a better deal and a more knowledgeable mortgage professional. The guys at the bank don’t process any of their own loans and they don’t have much incentive to get your loan done unlike a commission only mortgage professional.
There is a chance that the rates for this program will come in a little bit higher than a conventional refinance on a property that does have equity. I will not know for sure until we actually have access to the program in March but it is not uncommon for interest rates to be pushed up for higher risk loans and there is certainly a higher risk on a property with no equity. As for the fees, $3,000 is pretty typical to cover closing costs on any loan. Sometimes a lender will do a no cost loan but that just means that you are getting a higher interest rate than you would be getting if you chose to pay the fees. A good lender should give you a couple of different rate/fee options.
What I’m trying to say is don’t get discouraged yet, there may be some help for you in a couple of months. I’d be happy to answer any other questions you may have too. Good Luck on your quest to retire early, I’m going to have to check out more of your blog, I just caught this post on Twitter. Also, I have a blog that I’ve started recently that talks about different topics related to mortgage and real estate, please check it out at OpenMortgageLA.com
Thanks for your comment. I’ll keep my eyes open for the upcoming changes. If we can lower the monthly payment by $200, we’ll pull the trigger.
I don’t qualify for HARP simply because my mortgage is not with Freddie or Fannie. And I can;t refi into one of their loans because in the development I live in, the condo association is not FHA approved. I’m stuck with an interest rate over 6% and can do nothing about it because my LTV is 100% because of the drop in prices.
From my understanding after talking with a handful of lenders, is that outside of HARP, no lender will refi you unless you have at least 5% equity in your house. Added to that, the rates you see advertised, 30 yr fixed for 3.XX% assumes excellent credit, and at least 20% equity. That is why you are offered rates in the mid 4′s. You are a higher risk and as a result, the interest rate is higher. I was told even though my credit is excellent, if I had 5% equity, my rate would be 4.5%. The point of all of this: always read the fine print in advertisements.
Sorry to hear that. The Freddie/Fannie requirement is tough on many people. Hopefully they can change that somehow.
The government is in control of Fannie and Freddie but not the mortgage backed securities that hold so many of the loans out there that were closed prior to the meltdown. In all of this political discourse going on right now Fannie Mae and Freddie Mac are made out to be the bad guys but in reality, they always held a higher standard for borrowers than the Sub-prime and Alt-A market that was funded by the mortgage backed securities. Fannie and Freddie did relax their guidelines during the mortgage boom in order to be competitive with the private money loan providers but the true culprit is the politicians who deregulated the mortgage industry opening the door for the mortgage backed securities. If Fannie and Freddie are shut down it will cause another housing crisis without question.
After today’s news, it looks like mortgage rates should be low for awhile. No raise in the fed rate until 2014! There is a big middle finger to savers everywhere eh? Gotta love free money.
Not quite free, but still pretty nice.
You can buy more properties to take advantage of the low rates.
Ok. Read your article. call Quicken Loans. I called all thses banks of America but not sure you understand this, they dont care!!! My lender was Chase but I didn’t even call them but instead called Quicken under old HARP (did 125%max) and reduced my drate from 6.3 to 4.3.
You can call any lender to get HARP 2.0 done but for 2.0 you need to waits until March 2012.
I called Quicken loans and they wouldn’t give any quotes unless I give them my SSC. I’ll keep them as a last resort. I have a few more contacts to try.
i would call quicken, ranked #1 by JD Power and has an a+ rating with the BBB. Every company needs your SSN to pull credit to see what you qualify for, this should not push you away. Call Quicken, they just refinanced my parents and closed in 12 days under HARP
I am working with Quicken. They are very fast, I am impressed.
I am an Illinois loan officer and can personally tell you this program has helped a lot of clients. Typical closing cost are about $1350 being fair and basing this off of my averages and yes big banks do charge more their a retail bank and have tons of overhead, I am a broker and have been since 2003 and do very well. You have to keep in mind the rates you see advertised on the TV, Internet, or even the radio are the best rates that are out there, most likely paying costs as well. Those loans advertised are typically loans with 30% or more in equity, and 740 and higher on FICO score – it is out there but not for the majority. Streamline programs are not getting these rates, the higher the “risk” the higher the rate. low credit+ low equity =higher rate, its been this way since Fannie and Freddie Mac imposed “risk based” pricing years ago. I have done several HARP refinance loans, so banks are doing them – yes since the beginning. Also this new 2012 HARP is supposed to release the loan to value limit but also please keep in mind banks are the ones lending money not the Gov. I don’t charge an application fee either – and by the way most of the places that charge an “application” fee – ask them what that actually is, Ill almost bet its used for appraisal. if your in Illinois and want to know if you can do anything, ill let you know for free. email me jon@smartmtgs.net Good luck, Jon
Thanks for your input! I’ll ask around more.
I’ve received several ‘urgent’ unsolicited refi offers from Citi – my current loan servicer. First one was in January – offer good until 01/13/2012 – rate was somewhere around 4.375 I think (30 year fixed.)
Received another one from them today – offer good until 02/02/2012 – 3 days away. No hassle refi – just send in the paperwork.
Rate is 4.875 (30 year fixed)
My current rate is 5.75 – been paying about 7 years.
I think these big banks are trying to get people locked in to a HARP 2.0 refi before the smaller banks are able to get involved and start competing at the lower rates. The smaller banks can’t get involved until the auto-processing aspect is available in March, from what I read. And you can’t refi twice via HARP 2.0.
So, if I were to get my auto-refi through Citi right now for 4.875, I’m then stuck and can’t refi again through it once the smaller banks start to get involved in March.
So I’m holding off looking until March, when more lenders can start competing.
I was also under the impression, but fact-check this if important, that banks aren’t taking on a higher risk by a HARP 2.0 loan – they’re backed by the govt. right – so where’s the additional risk, to them?
I have a feeling the risk to the big banks is that people will start to have more options in March, and will then refi with the smaller banks with lower rates. And that’s a risk they don’t want, so better to offer a little bit lower rate than they have now, and make it easy. But if I can get a 4.0 in March/April, from a smaller lender, makes sense for me to not take this quick/easy offer from Citi at 4.875. I think they’re just looking for the people that don’t look into the details. But isn’t that what got them into the trouble in the first place by taking advantage of people that don’t look into the deails and understand what they’re getting?
You have the right idea. 4.875% is well above market right now (I’m a mortgage lender). If the program has similar pricing to the initial version of the HARP program you should be able to get a rate in the low 4% range. March 17th is the date that this will be available to the smaller institutions.
I just put in an application with my current lender (GMAC/ ALLY). They are offering me under HARP 2.0 a 4.625% 30 year fixed on my $290,000 mortgage in NJ with net closing costs of $1,570. Since I’m currently 6 years in on a 5.75 % 30 year fixed, I think I’m just gonna take it. Should be easier and cheaper to go through my current anyway. I think?
Did you try Quicken Loans? They gave me 4.25% 30 years fixed. That’s much better than Chase.
As a lender myself I’d advise against the loan at 4.625%. That rate is way too high. You should be seeing rates in the 4.25% range like retirebyforty received.
Just wanted to caution all about what all the big guys are doing right now. My neighbor was also sucked into a refi by GMAC for 4.99%. I think all big guys want people to refi before HARP 2.0 really starts and lenders start competeing your refi. I my self will wait. 4.625% is not for the smart guy!
Talk to your bank again. The National Foreclosure settlement just came down the pipe. I got a mail from CHASE about a no cost refinance @ 4.38%. I would have taken this if I heard about it 2 weeks ago.
Just got quote from Quicken Loans for 4.50% on a 30 yr. with closing costs not including escrows of about 3K. Told me I have excellent credit and am easily within 125% on my current loan. The problem I am told is that because my loan is with Freddie Mac I can’t get a lower rate. If it was Fannie Mae I would do much better. First I’m hearing of this one. This is a little lower than 4.625% I’m offered from my current lender ( GMAC) but double the closing costs. Makes one want to hold off until some facts can be found somewhere.
In my opinion, maybe you can hold off until you find out what GMAC has to offer with the National Foreclosure Settlement deal.
Chase quoted me 4.625% about 3 weeks ago, but now they are offering 4.38% with no fee. That’s pretty good.
Maybe GMAC will roll out something similar. Good luck!
Thanks. Good luck to you as well.
On Feb 16, I received a Good Faith Estimate from CitiMortgage for 30 yr @ 4.375%. My loan is with Fannie Mae. My credit is only 660. My LTV is roughly 110% at 140K. There is a $400 fee and closing costs are quoted at about $2,800 from what I can understand. My current rate over the last 4 year is 5.625%, so this isn’t great but better than what I have and it’s acceptable if there are no surprises. Heavy customer services challenges with Citimortgage. It has not been pleasant. On Wednesday, I was on hold for exactly 3 hours and 16 minutes to get to agent able to process my request for a HARP-2 refi…a new life record for me! It was interesting that they denied me within 2 minutes of running my credit until they learned I had a 401K that was higher than the value of the loan, whereby I was then magically accepted within 10 seconds. hmmm. My sister in law is a broker and feels this rate is high and felt I should be getting 3.875% as one of her customers got this rate this week. She was the one who told me about the HARP-2. Comments/advice?
3+ hours of waiting on hold is ridiculous. That’s why everyone hate the big banks.
I think 3.375% is not bad. Is it a no fee refinance? That would probably make it worth it.
In my opinion, you should wait to see what they can offer you with the National Foreclosure Settlement. I heard it will take 3-6 months to roll out so keep a close eye on it.
I couldn’t get 3.875% from any big banks and went with 4.25%. I think the big banks won’t give people with high LTV the best rates. Good Luck!