What to Expect when Refinancing?

Question

I'm looking to refinance an owner-occupied condo I bought in February '13 in order to pull out some cash for other investments. I've never refinanced a property before, and wanted to get members' input on the process and if the numbers I am getting seem reasonable.

I've mainly been working with TD Bank. I've been really satisfied with their customer service, and my grandparents had a good experience when taking out a HELOC on their primary residence. I will continue to occupy the condo, and TD recently gave me the following numbers based on my estimated credit score of 700 and 80% LTV. The property value is around $90k.

-Closing costs $1,274; 5.625% 30-year fixed

-Closing costs $2,700; 5.125% 30-year fixed

Obviously which loan I go with depends on the length of time I plan to own the property; I save about $265/year by going with the 5.125% loan with higher closing costs. Unfortunately for me, I have no idea how long I want to keep the property!

What do you think of the numbers I posted - do they seem reasonable? What tips can you provide about refinancing a property? What has your experience been like with TD Bank?

Thanks in advance! Hope everyone has a great day, and I hope there are others out there who can learn from this thread as well!

Matt Devincenzo · Answer

They're definitely local, though a little bigger than some. They have about a dozen branches over a 4-6 hour drive area in central Florida. I just called all the banks in the town the property was in and asked if they could do sub $50K and got several yes'. This was still a Fannie loan, they were just willing to do the work on the smaller balance. I haven't found a local portfolio lender yet in the area, though that is my next goal as I know Fannie/Freddie are going to run out for me at some point.

William Donaldson · Answer

@Mike M. - looks like I was saved some trouble by the loan officer herself, because she didn't know > 50% of units have to be OO in order for FNMA to purchase the loan. She was completely confident over the phone we could get it done. @Jesse Gonzalez Thanks for your input. I agree that the rates are high. TD doesn't have any options for a condo that is in a complex where 50%+ of units are investor owned (this is in a complex close to campus). Looks like I'll have to go with a smaller bank, and I'm afraid that they won't have anything too competitive either. And I ran the numbers while I was on the phone with the loan officer, and it was very apparent that "buying points" is not a good deal for the borrower. @Matt Devincenzo Did you have to use a small local bank? I believe that is what I am going to have to use for an investment property I'm looking at that is sub-50k (as well as the condo since 50%+ units are NOO).

Jon Klaus · Answer

Re: TD Bank. Canadian banks trying to stick it us real Americans. (This is a joke)

Matt Devincenzo · Answer

Both rates are way high. I just did a cash-out, investment property, in FL, and it was a sub 50K loan for a 5% rate. All of those factors generally add slightly to the rate and I was still at 5%, so for an OO you should be well within the 4's, low 4's really.

Jesse Gonzalez · Answer

@William Donaldson Another thing I totally didn't address with you is the fact that you'll only be saving 265 per Year but the cost is 2700. That would mean that you recoup the cost in 10 years, typically you only want costs that will recoup in 3 years at the most so I don't see the benefit to you there.

Devan R. · Answer

The average 30 year mortgage rates as of this week are 4.2% - 4.3%. A rate of over 5% is high! Keep shopping around.

Jesse Gonzalez · Answer

@William Donaldson the rates are high if you were pricing it on today's rate sheet, I don't know the day you got pricing for your loan so its difficult to say if they were competetive that day or not. In general you'll be charged for the cash out and loan to value/credit rating that you have. Basically fannie mae, and freddie mac for that matter, assess charges to the borrower based on risk factors. These charges are straight across the board with almost every lender. You'll be "hit" for your credit rating and loan to value along with the cash out option. You may also be getting dinged for the loan amount because it appears to be low too. The best idea is to call 3 lenders the same day, typically the same time of day too, and get competing rates/fees and see if it makes sense financially. A short list of things you'll need to provide are(assuming your not self employed), 1. W2's for the last two years 2. most recent one months worth of pay stubs 3. hazard insurance dec page 4. Two months most recent bank statements, all pages, even if they're blank

Mike M. · Answer

Agree with Jeff S. Expect them to need to reinvent every single piece of info you've previously provided. Our last refi (same bank) was so painful I almost walked away from the 1.5% rate cut. Almost.

Jeff S. · Answer

Rates seem high.