Yeah some banks I believe do it without a charge but only internally with the same bank.
Mortgage Refi Question
- Thread starter cyfan92
- Start date
That's what we had to do when we bought our current house. First house was in process of selling, and we closed on our current house before the first house sale was complete. We opted to do the recast because we'd get rid of PMI and we'd get the monthly payments down to the amount we wanted, plus they didn't charge too much to get it done.
Basically, our thinking was (and is) that we'd pay extra on the loan every month, but if we get in a situation where money may be tight, we'd have the option to make lower payments.
And it worked for us, because of the way that they do property taxes down here. We were unable to take homestead the first year we lived here, but escrow didn't take that into account. Fun stuff.
Floating the rate in the process is probably a good idea especially with what is going on the next 30 days. Also depends on how your bank of choice does their locks, some do 10 days and some require 30 days. A lot of options out their but floating right now may be a good idea.
so everyone is aware...CloneGuy8's 3.5% with no costs and your comment about no floating looks like this to a bank...
3.5% might pay the bank 190 bps (basis points), which is the loan amount x .019. (That 190 a fairly accurate estimate based on yesterday's rates). That's the Service Release Premium that is paid to the bank to sell the loan to their investor. So based on that information, they know they can cover your costs and make a little money. If the bank ends up servicing the loan, they may not make an SRP so they have to account for what they'll earn in servicing the loan.
Presently, most servicers sell their loans to Fannie/Freddie at a loss in order to remain competitive. Instead, they count on having the loan in their portfolio for years to come...usually the break even is around 2-2.5 years. Then, they get paid by the GSE for servicing.
The reason they don't float that no cost piece is because they know their costs fairly well...so if they allow you to float, their srp payment and relative revenue can change based on the market conditions.
When you lock your loan, they take "coverage" and commit to selling your loan along with a certain amount of other loans. That 3.5% loan will be in a traunch that requires them to deliver that loan or pay a pair off fee. So if they are a seller/servicer, they have a mandatory delivery which means they want to ensure you are committed to the process...again, why they won't allow you to float.
Don't get greedy in a market like this. The difference in rates/payments is minimal at some point and just getting something that moves your payment considerably is key.
Not sure on CloneGuy8's loan amount but here's how it looks for PI on some rates at $175k on a 30-year, just to show you how tight the payment's are within an eighth.
Be careful playing the float game in this environment. The 10-year and spike quickly and rates can be quickly out of market to be beneficial for most people.
175,000 @ 4.25% = $860 PI
175,000 @ 3.25% = $761 PI
175,000 @ 3.375% = $773 PI
175,000 @ 3.5% = $785 PI
175,000 @ 3.625% = $798 PI
175,000 @ 3.75% = $810 PI
In all fairness, it does take years and years of rigid discipline and training. The average Joe off the street can't just simply step into these shoes...
Recast costs and options vary greatly amongst services. Anyone wanting to do a recast should check with the lender before they originate so they can shop for an investor that has a favorable recast policy. The cast can drop your monthly payment so not something u can typically do on your own.
I believe Fannie Mae limits them to only 6 months. But it really depends on the bank. There is an "update" form that banks can use to get an appraiser to check a box saying the value hasn't gone down.
Correct, it’s a recertification form! If it’s a Fannie to Fannie loan product, u can often get a waiver as the valuation info is already in their automated system. I think we’ll see a lot more automated valuations over the next decade... will be good for consumers cost but I would be worried about job security if I was an appraiser.
No decent appraiser will check that box without at least do the $100 walk through. Cheaper than a full appraisal but still a cost.
Some banks are just using assessment numbers and that is how they are getting by.
FmHA, reverse mortgages or any other govt backed loan will require appraisers. They require certain things that automation can’t do.
Within a few years we'll have an increasing number of transactions with automated value and just an inspection.
The industry is working hard to take the time and cost out of the appraisal process. Almost all purchase transactions come in at the purchase price or above. It can be argued that appraisers aren't bringing much to the process in those cases. LTV and data sources help mitigate the collateral risk in a refi situation.
Pay an inspector less, speed up the loan manufacturing process, increase lender margins, etc.
Technology is moving very rapidly in the mortgage industry
Agreed, I misstated in my post that you replied to, will require inspection is what I meant.
Trust me, many do and are encouraged by the banks to do just that. The industry is a bit of a mess / change and a down turn could get really interesting.
The reason they come in at or above 90% of the time is because they get fired or kill deals being a little low.
As someone who sold loans years ago, boy do i wish they always came in at or above 90% of the time. Of course, that was during the downturn. I had multiple deals die on bad appraisals, even when i'd been conservative in my home value estimates, pulling from as many sources as i could.
The National avg was 88-92% I believe coming from CoreLogis or WF data I believe it was. That is the entire problem. Everyone is mad at the appraiser even if they did a great job. The buyer doesn't get a house they just fell in love with, the seller obviously is mad, and the banks are mad because they are all paid on commission. So the banks work hard to make up their own numbers and just cut that pesky person out. Some banks are better than others and likewise with appraisers
