I thought about doing a refi when rates hit around 5.25%, then I checked the FEES.

I DON’T mind paying a few points IF it translates to lower rates. But you’re talking 2 points to “creep” the APR down maybe 0.25%? In our case, for around $3000 in points? Don’t take the points, and you’re back at around 5.6%, where the “payback” time for running the refi (the cost payoff on the fees, relative to the payment savings) starts pushing 5+ years.

That’s becuase of the FEES. More FEES than I have seen for quite a while, and BIG ones. For a while I was seeing $1000 for “loan origination fees”, NOT points, those were separate. The $1000, or a BIG chunk of it, is a “polite” way for the lenders to suck up more points.

I suspect that any slightly “risky” loans (higher LTV and riskier income/loan service) are having to pay exorbitant rates to run a refi. That leaves many folks who bought/refied in the last 2-3 years before the “big bang”, and, like us, are sitting on “clean”, low LTV notes (lots of principle paid off) at around 6.15-6.5%. The banks DON’T want to LOSE these notes, by having them refied out from under them. They are some of the “clean” notes held in their portfolios. So, if such current loan holders WANT to refi, at a TRULY discounted rate, they get beat up on points, and then fees.

The unstable who bought on “risky paper” will get bailed out by the Feds, one way or another. The rest of us who would LIKE to refi, to a truly LOWER rate, are locked in by high points and fees.

If you’re looking to refi, use a business pack calculator, or have someone who knows what they are doing, to run a TRUE amortization of the loan, adding in the EXCESS fees. The TRUE APR will suddenly jump back into the low 6% range. Then, using the stated APR and payments, calculate the number of years to hit “payback” on the points/fees. I think you will be shocked. “Payback” used to sit at around 3 years for a reasonable APR spread on two loans, now I see it pushing past 5+ years.

So much for running a refi “to save money”. Caveat emptor. If you refi and only look at the $150/month you are “saving”, you are playing into their game. With the high points/fees, you WON’T be SAVING any money for 5+ years.

I have been looking at some loan packages to TRULY save a few dollars, and at 2+ points, and with the fees, they are pushing $6K total in cost. We have 55% equity, almost zero debt, and high FICOS. So the points are to push the APR spread down, not because we are a bad risk. But that same $5500-6000 keeps showing up when enough points are factored in to get a TRUE savings.

I feel for those who can’t use a business-pack calculator, and only look at the meager $ spread between the loans. They are “meat” for the lenders. If you DON’T really know what you are looking at, get help from someone who does, to analyze the proposed loan. Bury your pride, and get help, or you will end up “feeding” the lending institution, paying BIG $$$ for a meager “savings” they will show you as the reason you should refi. Very likely you will see the “payback” for the points/fees is YEARS.

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