All Forum Posts by: Tony Ve

Happy to say that Rocket/Quicken came back with a more realistic offer... 1.375 points. Their rate is 3.875 so I'm still shopping but this is at least something I could accept if I can't find anything better. 

Thanks to everyone for your help

Luke, points are what lenders charge upfront at the loan origination.  There's two types. One allows you to "buy down" the interest rate, ie pay up front to lower your interest rate. The other type that is more common today since rates are so low, is that lenders just charge you a fee upfront that allows them to recoup their interest faster.  And for this they should offer you a below market interest rate. Should.

This upfront fee is why there is a difference between the interest rate on the loan and the APR. For example, the interest rate may be 3.5% but the APR is something higher like 3.65%. The upfront fee is spread over the life of loan to arrive at a rate that more reflects the true cost of the loan though you actually just pay 3.5% annually in interest.

Mathematically, keeping it simple, say you have a $100k loan at 3.5% for one year. You will pay $3500 in interest. A point is equal to 1%. So if I'm charged 3 points, thats $3000 I pay upfront. That would make my total cost (ex closing) $6500 or a 6.5% APR. If this is spread over 15, 20 or 30 years, it becomes a smaller increase to the actual rate which is why most interest rates and APRs are not far apart.

FYI, I'm a low to mid 700s credit score

I started a refi process in Q4 last year to use the proceeds for a new investment property but for various reasons wasn't able to complete the transaction, thankfully since rates have come way down. I was using Chase who holds the current mortgage. I've been happy with them as a lender and in my experience they are the best lenders and servicers out there.  Their rates were competitive too.  

Fast forward to today, and Chase is no longer in the cash out refi biz, at least not for investment props. So I went to Rocket and they are charging nearly 3 points!  Is this the new norm?  Does anyone know of other lenders doing cash out refis on rentals?