Here’s an example of how not to refinance your mortgage; a typical refinancing transaction gone wrong. Our homeowner in this is example is called Jackie. Jackie purchased her home in Germantown Maryland, and owes $330,000 on an existing thirty year mortgage at 9% interest. Jackie decides she’d like to refinance her fixed rate mortgage and take cash back to pay off the bills she racked up during her family’s summer vacation.
How does Jackie go about refinancing her mortgage? She calls a mortgage broker recommended by one of her girlfriends. We’ll call the mortgage broker Terry. Jackie’s friend has never used this broker, she only knew him as a casual acquaintance. Jackie calls up Terry who immediately goes into his sales mode pitching Jackie with a hybrid Adjustable Rate Mortgage. On the surface it’s an attractive offer: Terry tells Jackie that she qualifies for a 7.75 percent interest rate that’s fixed for 5 years. He’s only charging her 1.5 points for the origination fee and she’ll get $25,000 back at closing.
Jackie thinks she got a fantastic deal and thanks her friend for referring her to Terry. Think Jackie got a good deal refinancing her mortgage? Well, since the title of this article is how not to refinance your mortgage, you’re probably thinking Jackie got taken to the cleaners, and you’re right. Here’s where Jackie went wrong with her new mortgage loan.
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