Quicken Or Local Lender to Refinance?

[Quoc Tran]

Hello Wonderful People of BP,

I am looking to consolidate the loans on my primary home and would like some advice on how to go about it.

A little backstory: I am currently house hacking a SFH, renting out 4 bedrooms. I intially acquired the home for $490,000 and was advised by my realtor to do a 80/10/10 piggyback loan. This was my very first home purchase (and before I found BiggerPockets) so I took her advice because she, herself, was a seasoned real estate investor. She has been in business for 20 years and seemed to know what she was talking about. The idea was to eliminate PMI on the first mortgage because it was at 80% LTV.

I financed the home purchase price by doing 80% with a 30yr conventional at 3.99%, 10% with a second mortgage at 6.5%, and 10% cash downpayment. The second mortgage is 20yrs ammortized, with a 7 yr balloon. I've had this house for about 2 years. The total monthly mortgage payment for both is $2600 (P+I+escrow) and I get around $3300 from rental income. It's not a bad house hack, but something about the piggyback loan always bugged me and I did not know exactly what... 

Current Situation: After listening to BiggerPockets podcasts, I realized that no one ever talks about using a piggyback loan. And after doing my own math, I would have saved $50/month by just financing 90% of the deal in the first place! My agent's advise was bunk, and I was too dumb to realize it.

I've been shopping around for the last month to see if I could consolidate these two mortgages into one. I am in the final stages of a refi with Quicken and all that's left is to sign on the dotted line at closing. Both balances will be conslidated into what they call a "hybrid loan". It's 30yr amortized, fixed at 3.99% for the first 10 yrs and adjusted rate after that. Loan amount of $435,000. To me, this sounds like a fair deal because I am maintaining the rate on my first mortgage, eliminating the high 6.5% rate mortgage, and I don't plan to keep the house for more than 10 years. My new monthly payment would go from $2600 down to $2433.

However, the net closing costs seem pretty high at $10,000 and makes me feel uncomfortable tacking that balance onto my existing amount and basically eliminate a year worth of loan pay down. Also, a savings of $157/month is not very much compared to $10,000 in costs. That's over 5 years to break even.

I got a quote from AmeriSave. They would do the exact same loan, but with $6000 in closing costs. They're just not as reputable.

So, what would you do in this situation? It seems like a lot of investors recommend going around to local credit unions or community banks. What kind of closing costs should I be expecting?

Thanks in advance,

Quoc