Refinance through the same bank?
February 21, 2008 7:05 AM   Subscribe

Is it possible to refinance through the bank that holds your mortgage? Is it desirable? Is it easier?

I bought a house in August with a Bank of America no fee mortgage at 7%. I'm wondering if a) it makes sense to refinance now, even just a few months in, and b), whether I should approach the mortgage holder first and see what they can do. It seems to make sense that they'd want to keep the business rather than letting it go to another company, but I'm wondering if I'm missing something, since the web seems to have little info on doing so.

Other salient facts: 30 year, fixed rate, 10% down. I'd be willing to consider a 15 year mortgage if the rate is low enough now, because we could probably afford it. We plan on staying here for at least 5 to 10 years, possibly longer.
posted by condour75 to Work & Money (12 answers total) 3 users marked this as a favorite
I got a better rate refinancing through my existing mortgage holder than was offered by competitors, a couple of years back. It's certainly worth trying at BofA - and one or two alternates.
posted by anadem at 7:17 AM on February 21, 2008

Your current bank will be pleased to consider your application for refinancing. We have done it in the past when rates dropped significantly in a short period. They want to keep your business, assuming, of course, that you have been a model customer. Keep in mind, however, that the market has tightened (even since last August), so the terms and conditions may be slightly different from your original loan. It is definitely worth inquiring with BofA as to what they can offer you.
posted by flyingrock at 7:19 AM on February 21, 2008

Response by poster: Excellent -- and yes, we've been model customers for the short time we've had the loan, and our credit is good.

An additional question -- for a refinance, how much in the way of fees, points, and paperwork might we expect? Obviously it's worth doing if it saves a lot of money, but I'm wondering what I'm in for, and specifically whether going with the same bank might make that portion a little easier.
posted by condour75 at 7:24 AM on February 21, 2008

A refinance is just a new mortgage that pays off the old mortgage. You can expect all the same fees, points, and paperwork as when you got your orginal loan. If you're refinancing through the same lender, they may cut you a break on some of the documentation, and there are certain discounts you can get like a reissue rate on the title insurance, et. al. But it will be similar is cost and scope to getting your first mortgage (except, of course, finding the house).
posted by coryinabox at 7:28 AM on February 21, 2008

I also refi'd through my existing note-holder, and the process was pretty straightforward. In my case, it didn't turn out to be worth it, because I wound up selling the house before I saved back the upfront fees.
posted by adamrice at 7:29 AM on February 21, 2008

It simply depends on the BofA program. We have done it with our existing lender, and saved because of a no-cost program; our present lender offered something kind of similar, but made it unattractive by having higher rates; the same lender will sometimes offer specials or rebates that will only be evident to you if you get a mailing. So it depends on what your particular bank says when you ask them, more so than on what we here say. Do beware of gaining a cheap refi at the cost of relatively less attractive rates.
posted by Clyde Mnestra at 7:38 AM on February 21, 2008

(I am in NYS; it looks like you are too. IANAL, but I have done residential refinances/purchases for about six or seven years.)

One way you might be able to save money is to get what's called a CEMA (Consolidation, Extension and Modification Agreement) instead of a brand-new mortgage.

Say the balance on your present mortgage is $75,000. You could either refinance and get out another $75,000 mortgage (with the lower interest rate) or take out a CEMA for, say, $80,000 (the $75,000 of the present mortgage plus "new money" of $5,000, all at the lower interest rate and lower term).

If you take out a brand-new $75,000 mortgage, you will pay mortgage tax on the full $75,000. HOWEVER, if you get a CEMA, you will only pay mortgage tax on the "new money", the $5,000. Since mortgage tax in NYS runs about .75% of the mortgage amount (varies from county to county), it can save you quite a chunk of change.

This only works if you're refinancing with the original note-holder, though. There might also be other terms and conditions that preclude you from getting one of these. IANAL and all that.
posted by Lucinda at 7:54 AM on February 21, 2008 [2 favorites]

I am doing this right now and I asked to pay no more than title search and appraisal and they dropped closing costs by $400.00. I am at Chase and have had a mortgage with them for 15+ years and so far they are working with me to make this as painless as possible.
posted by readery at 7:57 AM on February 21, 2008

Shop around for a great rate. Even minor differences matter over the long haul. Is it important to you to have the servicing (payment acceptance, tax & insurance escrow & payments) stay local? I got a really great rate from my credit union, and they kept the processing. They make it easy for me to not be too sloppy about my bill paying.
posted by theora55 at 7:59 AM on February 21, 2008 [1 favorite]

Make sure your existing mortgage does not have a prepayment penalty. Some mortgages have a penalty fee for the first 2 years of the mortgage. If you have that in your contract, it isn't impossible to refinance, it will just cost you more money. One advantage of working with your current lender if you have that prepayment penalty is that they might be willing to waive it if you are refinancing through another loan product through them.
posted by 45moore45 at 8:22 AM on February 21, 2008

Yes. I did this last year -- refinanced from the same company that held the original mortgage. They made it very attractive by waiving almost all the fees and points; since it was all "in-house" it was mostly a matter of sending paperwork back and forth, getting signatures, etc. It took about a week and a half, from the first phone call asking what they could offer to sending back the final paperwork. I think my total costs were about $50 -- not bad for something that will save me tens of thousands of dollars over the next decades.

I also called other banks and a mortgage broker, and even though two were able to offer slightly better interest rates, the loan origination fees and other costs made that a worse deal. Call credit unions, too -- sometimes they can beat the big banks by a significant margin.

I suggest spending time with an online mortgage calculator (I used this one; there are many others; there are no doubt spreadsheet versions, too) -- I would use it when on the phone with the bank, plugging in the different numbers they provided to see what the actual impact was on total interest paid and other figures. Small differences really matter, and some banks give you a lot of options which can get really confusing.
posted by Forktine at 8:23 AM on February 21, 2008 [1 favorite]

There are lots of handy calculators out there to help you calculate the expenses and benefits of refinancing, like this Bankrate re-fi calculator for example.
posted by geeky at 9:10 AM on February 21, 2008 [1 favorite]

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