Comments on: Refinancing Your Home

By: No Debt Guy

No Debt Guy — Thu, 15 Oct 2009 10:00:42 +0000

Sampson, just for interest sake with a 15 year amortization your effective interest rate with the cash back offer is 3.38% Hard to beat that for five years.

By: No Debt Guy

No Debt Guy — Thu, 15 Oct 2009 09:46:22 +0000

Just a comment on the $760 savings. While that may not be much you also have to consider that you are getting an additional two years at a rock bottom rate. If you are renewing in 3 years you will not likely get rates that we are seeing now.

By: Adam

Adam — Wed, 14 Oct 2009 19:19:32 +0000

FP – Not sure why they don’t offer it any longer. I imagine it’s because there would be a flood of people looking to blend and extend at rock bottom rates, meaning there would be quite a loss of revenue for the lenders. When rates are at the bottom, there is only one place for them to head – up. They have nothing to gain by allowing blend and extend at this point, only something to lose.

There was a time when you could blend and extend every 6 months and average down your rate quite nicely.

By: Sampson

Sampson — Wed, 14 Oct 2009 16:38:19 +0000

@John, Its pretty much exactly how FP describes it. They can deposit the extra cash directly to your account.

FP, its certainly worthwhile shop around. We tied to use a broker, but this time they weren’t much help. I think variable rates are much more attractive now than they were 6 months ago when we locked in. With rates on the rise, discounted variable rates are likely to show up pretty soon.

I’ll reiterate that you really should get several confirmations regarding your breakage penalty. We were sorta screwed by our previous lender since every time we called, they gave us a different penalty (and it kept going up). Until you see the official payout statement – don’t trust what they tell you.

By: Four Pillars

Four Pillars — Wed, 14 Oct 2009 16:19:54 +0000

John, I can’t guarantee the specifics since I’ve never done it myself, but I believe that if you get a mortgage for an amount that is higher than the mortgage it is replacing (as in my example) the bank will give you a banker’s draft for the difference. I would assume you might be able to get it deposited into your bank account as well.

You would have to talk to the lending institution to verify what your exact options are.

By: John

John — Wed, 14 Oct 2009 16:09:57 +0000

Thanks Four Pillars, but when you get a new mortgage at the original rate does the mortgage lender drop the extra amount( 40k in your example) into your account or how would that work?

By: Four Pillars

Four Pillars — Wed, 14 Oct 2009 16:06:32 +0000

Adam – thanks for the update. I didn’t realize that “blend and extends” were no longer offered. I wonder why?

John – if you borrow to lower your principal amount then you have to get a new mortgage for an amount that is equal to your (recently lowered) mortgage plus the amount you owe for the loan.

Ie if you owe $200k and want to terminate the mortgage – borrow $40k from somewhere, pay down the mortgage to $160k. When you get the new mortgage – borrow $200k. Your actual amount owing on your house is $160k at that point so you use the extra $40k to pay off the “reduction” loan.

In the end you will owe the same as when you started ($200k) but will save on the termination cost.

By: Adam

Adam — Wed, 14 Oct 2009 15:55:44 +0000

Just an FYI, there aren’t any lending institutions that I know of that allow ‘blend and extend’ any longer. That was a thing of the past.

By: John

John — Wed, 14 Oct 2009 15:21:49 +0000

On the topic of reducing penalty for breakage by prepaying I am unclear how to pay back the loan if a loan is needed in order to maximize the prepayment?

By: Thicken My Wallet

Thicken My Wallet — Wed, 14 Oct 2009 15:00:01 +0000

CC- sorry for your loss. Take your time coming back and do what you have to do. Best.