Any finance people out there?

[vicarz]

I am totally baffled. I just refinanced my loan...again...at my mortgage company's request and expense.


Yesterday I received an overnight UPS that I wasn't expecting from my mortgage company, citibank. The package was something explaining that they knew my current mortgage balance, interest rate, and term - and were giving me an opportunity to refinance at a lower rate for the same term with no closing costs.

Huh?

Ok, so they drop my mortgage rate from 6.5% to 5.125%, the lowest rate going at present
a rate I've only paid for for about 1 or 2 years or so (I refinanced to get rid of MIP crap that you can't pull from a FHA),
making a couple of dollars for extending the life of the loan the extra year or two I've been paying it (same term),
with no closing costs (they pay all costs except a notary fee as I must notarize some papers to close the refinance - there are no costs dumped back into the loan or anything like that)

Why?

They already had me locked in. My interest rate is/was higher than the prevailing rate by over a percentage point. They're volunteering to make less money while continuing to service my loan.

Why?


I mean I love it, but what in the hell are they doing this for? What is their angle? How do they profit from this non-venture? It's like I've arrived at the counter with an item to purchase, and they offer to sell it to me for less!

Comments

[aintrabar.livejournal.com]

Becouse you just paied them for two years now your starting over again. And the loan is now a higher amount due to the closeing costs rolled in. My mortage company jsut called me too to do the same thing.

[vicar.livejournal.com]

That's what I thought, and before I sign I'm definitely going to double-check, but they assured me that there were no closing costs rolled in at all. I thought that might be their game - to say "No closing costs" when what they meant was "You pay closing costs by increasing the amount of the loan, sucker!" but that's not the case with this offer.

Thanks though - that would add a lot to the cost if it were the case.

[lilkender.livejournal.com]

The loan officer might have been taught by the company that there are "no closing costs" and might not even realize that they might be "rolled in", so the person you talk to might not be consciously lying to you.

If you're paying your bills on time then you are a reduced risk .. they may offer you a lower rate once in a while to ensure they keep your business. Or to entice you to increase the loan.

[vicar.livejournal.com]

She did have a strong accent. I'm going to count that as yet another vote to really comb over the fine print and expenses etc.

They do get a year of two of nearly interest only payments, but at my significant savings over the course of the loan I still win out overall by quite a bit.

three thoughts

[anarcha.livejournal.com]

A. because they're kicking you back to owing for 30 years, instead of 28 or whatever (though you said you checked it, so maybe that's not the reason).

B. Because everyone's refinancing all over the place, and they'd rather keep you at a lower rate than lose you all together.

C. Because they're trying to inflate their numbers for mortgages closed (me being cynical -- I have no basis for believing this).

Re: three thoughts

[vicar.livejournal.com]

That may be.
A. Actually it's from 14 to 15 years or some such - not a big deal really. That would make sense though.
B. This seems like a strong argument, though the time would have been when the headlines were full of record shattering interest rates which have since climbed back up a bit.
C. This could also well be!

An office-mate said it may be that they only service loans, while selling them to 3rd parties. It might make more financial sense for them to pocket a commission than collect interest at a low rate for over a decade.

three thoughts

[anarcha.livejournal.com]

A. because they're kicking you back to owing for 30 years, instead of 28 or whatever (though you said you checked it, so maybe that's not the reason).

B. Because everyone's refinancing all over the place, and they'd rather keep you at a lower rate than lose you all together.

C. Because they're trying to inflate their numbers for mortgages closed (me being cynical -- I have no basis for believing this).