Thursday, September 13, 2012

Refinance - Part 10

Well it took four hours, 25 e-mails, and three conference calls, but we signed our refinance paperwork yesterday.

As I previously posted, I have not been particularly impressed with the level of service we have received from either the mortgage broker or the closing agent.  But, as I noted previously we are very happy with the rate and term and the bigger banks (the ones with better service) were not able to match these terms.

First, lets start with the positives.  We got a 2.75% fixed interest rate, which is a rate reduction for us of 2.05%.  We also went from a 25 year term, on which we had 22 years to go, to a 15 year term, which means we are cutting seven years off our loan term.  Overall, the new loan will save us approximately $180,000.  Our actual mortgage payment is only going up a $100 a month.

Additionally, our closing costs were approximately $3,100, which is about $1,700 less than we paid in closing costs when we refinanced in 2009.

And, while I thought there was a prepayment restriction the first two years of the loan term, I was incorrect.  Rather, there is no restriction on prepayment so we can continue to work the goal of getting our primary home paid off.

Now the negatives . . .

If you follow my adventures regularly, you know that I am not a fan of bank escrows for tax and insurance.  But to get the best rate, we were required to escrow our property taxes.  I plan to, once the loan is assigned (the mortgage broker will be immediately reassigning our loan), contact the lender and see if we can reach an agreement to waive escrow after a certain period of time.  I have done this before and have had success. We also have to prepay our property taxes, as part of our closing costs, since our property taxes are due to be paid in November.  However, I don't count that as closing costs since we would be paying that money in November regardless of whether we refinanced our property.  And, since we do our own escrowing, we already had that money set aside.

I thought the level of customer service during the closing process was dismal.  I had asked to receive our closing documents a day in advance of the closing and I was told that I could not have them until closing.  We have bought, sold, refinanced a number of properties in the last 10 years and I have never had a problem with requesting documents a day in advance.  The mortgage broker actually suggested, and I would say pressured, us to sign the documents without reading them because there is a three day rescission period. I'm not sure how the rescission period would help me if I found an error after the fact, since the rescission period applies to the whole loan and we would likely lose our great rate and term.  We actually went several rounds, before I put my foot down and demanded sufficient time to review the documents in advance of signing them.

So, the closing documents were delivered to my office and then closing was scheduled for three hours later.  Do you want to guess what I found in the documents?  Errors, errors and more errors.  My husband's name was incorrect throughout the documents.  My husband and I, like many professionals, do not share the same last name and his name on many of the closing documents utilized my last name.  While he is used to being called Mr. Sam, obviously on legal documents you need to sign your legal name.  For a while yesterday, it was unknown if we would be able to close, but it was determined that the important documents were correct (i.e. the note, the mortgage, etc.) and on the other documents he could correct and initial.

Regarding the HUD-1 settlement statement form, borrowers are entitled to receive the document one day in advance of closing.  Despite repeated requests, we did not receive same until the day of closing and only shortly before we were supposed to close.  After closely reviewing same, I located an issue such that the HUD-1 had to be corrected and reissued.  The problem I uncovered related to how much daily interest was calculated to pay off Wells Fargo versus the amount of daily interest the new lender planned to collect until our first mortgage payment is due.  There was more than a week where there was overlap, such that double interest was calculated to be collected.  I fully expect that we would have gotten a refund either from Wells Fargo or the new lender, but I'd rather the figures just be correct.  Since we did not receive the HUD-1 a day prior to the closing, we could not make arrangements for payment of the closing costs at the actual closing.  So now, we will be wiring the closing costs funds tomorrow.

Again, these are all issues that could have been address and corrected prior to closing, if I had received the documents as requested and, for the HUD-1, as required by law.  The mortgage broker kept blaming the closing agent and the closing agent blamed the broker.  I would say that they were both at fault and I certainly would be cautious in recommending either company to others.  I might recommend the broker because he was able to give us such a great rate and term and I thought the closing costs were reasonable, but I would absolutely warn others about the closing issues we encountered 


Anonymous said...

Congratulations on getting to the end of the process and locking in the great rate and terms! It's always a frustrating process but you came out ahead financially in the end.

I prefer the escrow accounts and have them on my rentals but could not get it on my primary residence. Less things to remember to pay and they budget it for you. It works better for me that way.

Karen said...

Congrats Sam!

I can't believe you get such low interest rates, nothing like that in Australia.


Sam said...

Anon - Regarding the escrow accounts, absolutely you should do what works for you.

It is a bit of work to manage your own escrow accounts, but once you have them all set up and you have your automatic transfer implemented it really is very little work.

I review the accounts once or twice a year to make sure we are saving enough or not saving too much and then, of course, we have to write the check for the taxes or insurance. The upside is that we earn the interest on the escrow monies, although interest rates are pretty low right now. Year to year we earn about $200-$300 in interest for our 4 escrow accounts, which goes to lower the amount we have to save to pay these bills.