New mortgage holder offers to refinance

[Joan.of.the.Arch]

Our mortgage just got sold to yet another company. We have yet to make a payment to them. We called to touch bases, and over the phone they offered to refinance with no closing costs to a lower % rate. Our remaining debt is small and in the past we did not find a company willing to refinance for so little a debt (about $30,000). But it was a couple of years ago that we tried. Our current rate is 6.78%.
They are proposing lower overall payments (have not specified the rate yet) and to finish payments two years earlier. As it is, we still have 17 years left on the mortgage (eh, we were poor when we bought this small house at a small price and financed for 30 years.)

Why would this company make this offer when it appears only we will benefit? Is it likely that they think we actually could easily find someone else to give us a better deal at this point?

[disneysteve]

Originally Posted by Joan.of.the.Arch

They are proposing lower overall payments (have not specified the rate yet) and to finish payments two years earlier.

If they will give you a new loan with a lower payment and a shorter term and no out of pocket costs, I'd say to go for it. You've got absolutely nothing to lose. The only thing I would do first is shop around. If they are willing to make that deal, so are other companies, so make sure you are getting the best offer.

[tinapbeana]

ask if you can view the contract up front. read everything, check to see what if any closing fees there are. my guess is they feel your loan is a low-risk refi and at least they'll make a small amt on the closing fees.

[disneysteve]

One other thing to look for - Make sure there is no prepayment penalty. If you want to make extra payments or even pay the loan off early, you want to be allowed to do so.

[sweeps]

Originally Posted by Joan.of.the.Arch

Why would this company make this offer when it appears only we will benefit? Is it likely that they think we actually could easily find someone else to give us a better deal at this point?

This can happen if rates have fallen enough so the mortgage company can offer you a rate 1/8% or so above the going rate, but it's still lower than the rate you have now. That gives them a slight spread on the rate without charging points or closing costs.

As for holding out, you could possibly find better, but you also run the risk of rates going back up, or having to pay closing costs at another firm.

[creditcardfree]

Make sure they are not rolling those closing costs in to the loan.

[disneysteve]

Originally Posted by creditcardfree

Make sure they are not rolling those closing costs in to the loan.

They probably are, but if the end result is still a lower payment and a shorter term, does it really matter? You would still save money.

[Ima saver]

Sounds like a good deal to me!

[b4freedom]

Sounds like a trap to me. If they own your loan and can collect more money from you, why would they offer to collect less money from you? If you owed me money and you were paying me $100 a month, why on earth would I come to you and say, "Why don't you only pay me $80 a month instead?" Double check to make sure it's not variable rate or some other gimmicky trick.

[safari]

Sounds like a good deal. Just make sure there are no pre-payment penalties. Considering the loan is only $30,000, I'd try to pay it off much sooner than 15 years. It makes sense to refinance it for 15 years fixed though because currently that term offers the lowest rate, even lower than 3-year ARM.