"Unexpected" Refinance

We are refinancing our house… sort of unexpectedly but sort of not. I know that probably doesn’t make sense to anyone, so let me explain.

The Husband and I have been talking about refinancing for probably close to 6 months now, however we haven’t really done anything about it. When we bought our house, we only had 10% to put down so we took out 2 loans: one at 80% and one at 10%. I am sick of paying 2 loans! We paid two loans the entire time we were in our old house… 13 years! And have been paying two loans since we moved into this house 2 and a half years ago.

Our house has appreciated enough, that we now have over 20% equity and we have been saying “we need to refinance, we need to refinance” but we haven’t made any concrete moves towards doing so. Enter a random form letter in the mail from our main loan servicer. It was about lowering our interest rate.

After opening it, I left it on the counter for The Husband to see. He took it and called the next day. The loan officer took down some of our information and ran our credit to see what we qualified for. (*Just an aside, my credit is pretty good at 808 and for once it’s higher than The Husband’s whose was 793.) We qualified for a zero-cost refinance that would lower our interest rate by .5%. I know that doesn’t sound like much, but that .5% would have lowered our total monthly payment by about $170. And the best thing of all, is that our loan would not start over. It would amortize over 27.75 years, which is what we have left to pay on our current loan.

After talking about it, we decided to look into our bank’s rates as well as finding out the rates with our mortgage lender for a traditional loan with fees. Our mortgage lender was able to be competitive with the banks rates and still amortize the loan over <28 years. They offered a mortgage rate 1% lower than what we are paying now, that would amortize at the same time as our current loan, and bring us to only having one loan to pay instead of two. And all of this for $300 less than we are paying right now!

It will actually save us more than $300 per month because we pay $375 per month on our HELOC, plus a little extra on our first. Going forward, we will still continue to pay the extra on our first and round up to the nearest hundred but won’t have to pay our HELOC. That is $375 more each month to go towards our credit card debt!

Because we are staying with the same loan servicer, our mortgage will not start over. (Which I am so thankful for because we are already behind the 8-ball on our mortgage and didn’t want to start all over again in our 40s!) It has also made the entire loan process pretty painless. We haven’t needed to provide any bank statements, retirement accounts, proof of work or residency. There are a few things we do need to provide, however. We needed to give them a copy of our contract with solar to prove there isn’t a lien on the house and a few more, relatively minor documents.  As our mortgage is currently with them it has been so easy! We started the loan process last week and have been able to, and will be able to, sign everything electronically.

We have never refinanced a loan before so we don’t know what the “normal” process is, but this process has been so simple. And worth it. We are going to save over $300 every month, over $72,000 over the life of the loan (more if we pay extra each month), and still pay it off in the same timeline as our original loan through them.

For us, that form letter couldn’t have come at a better time.