Is it Time to Refinance Your Home?


A few weeks ago, I received a call from my lender about my home, alerting me of a new mortgage program that was being put into place by the Obama Administration that would lower my monthly mortgage payment by almost $500/month. My ears perked up when he told me about this new federal program that he said he wanted me to consider after it was passed on February 6.

Saving $500 a month is a whole lot of money for most people. I started calculating what saving $500 a month would do for me. It would pay for my AT&T bill for my Blackberry and I-pad, my electric and gas bill, and leave me enough money to buy a pair of shoes at Nordstrom Rack every month! Perhaps, it was the “right” time to refinance my home, which had decreased in value by 35% since my purchase in 1998.

As promised, my banker called me on February 6, and asked me for some basic information on my finances. He explained to me that my current rate of 7.1% on a $230,000 30-year mortgage would fall to somewhere around 3.75%. He also said the new loan would not require an expensive appraisal or a tax return. I authorized him to start the process and agreed to meet him at the bank on State and Division, a few days later.

What I found is that this is not a “free” loan; there are closing costs attached to it. Yet, there are no points taken by the bank. The first question I asked him is if there are no points attached to this new loan, how do you make money? I didn’t want to fall for the “if it looks too good to be true, it is” camp, where I would find hidden costs that negated any savings I could get on the new loan. My banker does get a $395 processing fee and it appears that the government may be giving the banks money to get involved in this program.

Within 15 minutes after leaving the bank to fill out the documents to send to the underwriter, I received three calls from other banks wanting to give me a loan. Evidently, when my bank pulled my credit report, the other financial institutions were made aware of my activity. Is nothing sacred these days in our lives? These other banks were willing to give me more money to pay off my debt and wrap it into the mortgage. I liked the idea, yet didn’t want to push my luck and have opted to just try to get my new mortgage at the much lower rate.

President Obama created this plan aimed at making it easier for Americans to refinance their mortgages, urging Congress to act on what he called a “make-or-break moment for the middle class.” He said would “give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates.”

He also outlined what he called a “Homeowners Bill of Rights,” or, “one straightforward set of commonsense rules of the road that every family knows they can count on when they’re shopping for a mortgage. That set of rules, aimed at protecting borrowers, would demand simple mortgages with no hidden fees; would put in place guidelines to prevent conflicts of interest damaging to homeowners; give support to families who are current on their payments; and provide protection against inappropriate foreclosure.

My banker said that my loan was placed through their automated calculation and that he was 99% sure I would get the loan, but no guarantees and no return on my check if I was turned down. I took the risk in applying for the loan and even with the processing fee and closing costs, amounting to about $3,700 that will rolled into my mortgage, I will be able to start buying shoes in a few months! I’ll keep you posted if I get approved.


About Terri Lee Ryan

Terri Lee Ryan is a former Chicago commercial real estate broker, marketing consultant and hotel developer. An avid writer, she is the author of Life Is One Big To-Do List. In “People, Places and Property” she dishes on leaders in real estate, new places in your neighborhood and deals being done in Chicago.