Q: I am so angry at our “big box lender.” They talked my wife into a refinance loan modification back in April and we had done everything they asked for and still they haven’t modified our loan.
They were going to give us a fixed rate about 5 percent, which with all the closing costs would have made the loans APR at 5.25 percent.
Well after all these months the loan was still not done and they finally said I needed to give them a copy of the second mortgage note but only gave me four days to get it to them or the deal was off.
So, I said “Fine, the deal is off,” even though I got the copy to them as fast as I could. (I thought since I was paying them the money for a refinance, they should be doing the work.)
At that point, I told the loan officer that he needed to give me a better interest rate, like something below 4 percent, so they offered me 4.25 percent with a negative 1/8 point, which I did not understand, but they gave me 5 days to decide or the deal was off again.
I said forget it, and now I have the result of my 7/1 ARM which is 3 percent and will remain at that rate until next July.
Why should this process be so complicated and take so long? We just wanted to get a fair deal and lock in a better interest rate. It just seemed like 6 months was too long to process a loan.
A: I’m a little confused: Was it a refinance loan modification or just a straight refinance?
If you were trying to get a straight refinance, you did well by waiting. Interest rates have dropped down further. But I would look closely at refinancing sooner rather than later and I would start shopping around to other lenders.
If you have a second loan, you will need to get some paperwork on that, particularly if you plan to keep a line of credit open. You also have to make sure you have enough equity to refinance.
If you shop around, you’ll start to get an idea of how much you’d be able to refinance for in a 15-year or 30-year loan program, how much it will cost with each lender (including the second loan subordination agreement, which might cost you an extra $250) and how quickly they’ll be able to close.
Refinancing takes time, but not six months. A good lender should be able to refinance a loan in three months or less.
On the other hand, if you were doing a loan modification because you don’t have any equity or are under water or because you can no longer afford your monthly payment that can take six months to several years to complete.
As an aside, I continue to be astounded and extremely disappointed at how long some homeowners have been waiting for relief from their lenders, especially after the widely-floated idea that if you made three trial payments, you’d be approved for a permanent loan modification.
One final item, some borrowers who have adjustable rate loans are being surprised as these loans adjust. Short-term mortgage interest rates are so low, some borrowers are seeing reductions in their loan rates by two percentage points. While the adjustable rate feature may cause your loan to go down this year or next, we don’t know how long we will continue to benefit from these low interest rates.
But if you plan to move or sell within the next several years, the lower interest rate over that time period may benefit you and you may decide to keep the loan. But (and that’s a big but) if your loans are worth more than what your property is worth, you shouldn’t expect the property to increase much in value over the next couple of years. If you sell you may still find yourself short money to close on your home.
If you are in your home for the long term and decide to keep the adjustable rate loan you have, make sure you understand how it can adjust, what interest rate is used by your lender to determine your specific interest rate on your loan, when your loan adjusts and how much your loan can adjust up or down each time it adjusts.
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