Great website!  I just discovered it yesterday when I started to suspect that we might be overpaying for our re-fi.  We are refinancing our just renovated home and have a current appraisal of $850K.  We both have FICO scores over 740 and a second home with debt to equity ratio of .5 conservatively.  We just signed loan docs last night for $616K (jumbo conforming in Marin County, CA) on our primary residence 30YR Fixed at 5.25% and are pulling $75K out of that to payoff the construction costs.   I was pretty floored when the truth in lending doc showed some $13K in costs (including 1% Orig fee and .308% Loan discount, the rest seems to be add on stuff).  We paid for our appraisal out of pocket so that is not even included.  I started to suspect that this was high and got a funny feeling that led me to sitting at the computer last night and today doing some research.  Our broker is out on vacation and his assistants are saying that any changes need his approval.  Although I like our broker (he wrote our original loan) and would feel bad for the work he's already done, I'm feeling like we should fax over the cancellation document.   Any advice on this?

I'd say don't cancel yet. Give your Broker the opporturnity not to make his month on your loan.  If he balks, walk. 1.308% is $8,057.28 in commission. Sounds high to me, but I've been chastized before!

I can't give you any advice but I am in the same boat! We are doing a Refi in Silicon Valley and working with the same loan officer as before but he just emailed me the GFE ( Estimate) My husband and I are both speechless when we saw the amount estimated! My LO even told me on the phone when I locked my rate 2 weeks ago that since we wouldn't need an appraisal our closing costs could be below $2,000 in our estimate they total over $2800 and now our impound account again he estimated should be around $2000 that is over 5,000. So what I thought would be around 4,000 per my LO we are looking at over $8,000 in closing cost without origination fees! I just don't understand these numbers! Don't they know how much our property tax and homeowner's insurance should be? They are our current lender! The only advice I can give is wait till he returns from vacation and firmly demand answers for those costs! I just emailed my LO now because my husband won't accept this GFE!

Thanks!  What's fair?  We were told we'd pay a point at most to re-fi - so in my mind this loan was going to cost us 1% of the principal amount - is that a wrong assumption? And what about the other 5K on top of the commission?

What's fair is what you and your Broker agree to. Nothing more, nothing less. Some can work cheaper because overhead is low or they own the shop (no splitting commissions)

But yes, most charge 1 pt up front.  Looks like you are being charged an additional .308%= $1,897.28 or is that the Yield Spread Premium?

Hi CAmom,

I work for a small community Bank called XXXXXXX National Bank in the Bay Area and I have to say thats actually not that bad. XXXXXXXXXXXXXXXXXXXXXXXXXX doing cash-out on a high balance loan you have alot of add ons that you just cant get around. The market has changed alot and there is an add on for everything ;( XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Remember 1point is 1% of your loan amount and that right of the bat is $6160 plus other fees. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Thats the price we all must pay now :)

Good luck and feel free to contact me at xxx-xxx-xxxx if you have any questions.

Moderator Note: Solicitations not allowed in the forums.  Please refer to the Forum Rules.

Damian---read the rules before posting ph # and /or email address.  Thanks

Bob, I'm pretty sure that the 1% is commission (b/c it's to his firm and which I thought would include all of those fees that make up the other 5K) and that the .308 is the loan discount fee (term used on TIL form) from the bank funding it.  Also, Damian brought up the point that the cash out may be causing extra fees.  We don't really need it - it was a recommendation from our broker.  We are interested in the lowest rate we can get.  If that extra money affects our rate, its not worth it to us to negatively affect the rate on the bulk of the mortgage.  I thought that since we're well qualified, with great credit scores, we would be a shoe in for a good rate. 

If you don't need the cash out, don't take it. Why did your Broker recommend taking cash out? Does he feel that values will drop further and that  option will not be available in future?

Money at 5.25% is undeniably cheap.  Good luck!

We were talking about refinancing the 1st and equity line on our second home, but are thinking of listing it.  So we were throwing around ideas of how to hedge if it doesn't sell since the bulk of the debt on that house is in the equity line from the remodel of this one.  There's a decent chance that it will sell however and if it doesn't we're still cash positive with it rented and there's always the option to refi those loans as well.  So we don't necessarily need the cash-out option.

Christina, setting up your escrow is not a closing costs, it is only depositing enough money into your escrow account with the new lender so they have adequate funds to pay your taxes when due.  Your current escrow account will be refunded which will offset most of that.

Also, when refinancing there will be costs.  Whether $1000 or $10000, to figure out if it makes sense to pay the costs, divide the total closing costs by the amount saved to get a break even point.  If living there longer than that, makes sense.  I find many consumers cant see the forest for the trees when it comes to costs.  if it makes sense, your mortgage professional should be able to show you, if not get another opinion.

You have a three day period for cancellation... If it is something you are seriously considering, waiting too long could force you into the loan.

13,000 does seem excessive. My question is how does the final cost compare to his or her original good faith estimate? If this was the original cost of the loan, you should not have signed anything unless you were prepared to pay the costs.

With that said, I believe some answers provided have misinterpreted the fees charged by your current broker. The .308 cost in loan discount is not going to your broker. It is going to buy down the interest rate. Your broker stands to make 1% of this transaction. Paying .308 for a 5.25% on a con jumbo 30 year is not unreasonable, however the market has come down since you loan officer locked and current rates are closer to 5.000%... my question would be, why your broker did not renegotiate the lock for you after rates came down.

Difficult to say, but it doesn't sound like he is committing 100% to your case. Leaving town before funding, and not being able to get a hold of him (not good), not renegotiating your locked rate (lazy). I could go on, but you know the errors committed and no need to grind nails.

What you need to consider now is whether walking away and starting over makes more sense than closing and being done with it. If you rescind, you are back in open market, and if the market moves against you, 5.25% may turn out to be a good rate, but if the market holds it current ground or imporves you will have definitely overpaid for this loan. It's a gut shot call. Security of having the loan closed vs. risk of playing the market for better terms and closing 30 days down the road.

If you do walk away, truly walk away. Find someone else, with references, to complete your refinance. Agree on a set fee in advance with your new broker that will be charged (my fee for jumbo loans for example is half a point - made on the front, back, or sideways - doesn't matter to me). Get that commitment from your new lender in writing. Once you know his or her fee for service, it becomes a question of timing the market to capture the best possible rate.

Tough predicament you have found yourself in, I know you could get your loan closed for far less, the question becomes will the rate still be available. Best of luck, hope this was helpful, and if you have any more questions, you know where to post them.

CAmom, while I can relate to your feeling about the work already being done, your broker knows your loan will be funding in a couple of days and should still be available to/for you. I've gone on vacation too while I had transactions set to close, but I was also only a phone call away, had my laptop with WiFi access with me, and actually did work while gone, because THAT'S customer service! Being on vacation is NO EXCUSE when you've got such a major transaction on the line! I GUARANTEE YOU, if you send that cancellation over, your broker will be calling you before you go to bed tonight!

Also, your Truth In Lending should NOT be the place you're learning about $13K in costs. That should have been clear on your "Good Faith" Estimate. While we all hope to build lifetime relationships with our customers, we still have to continue to EARN your business. The mere fact that you brought it back to the same broker should also have assisted them with easing some of your fees for your loyalty. Though 1 point is pretty "standard", nothing says (s)he has to charge you OVER $6000 to do a loan for you, particularly with you being a returning customer. They could have done it for a flat fee of $5000 let's say. But as already stated, what's fair is what both parties can agree upon. I also realize that this is the sole source of income for many, so those BIG paydays on one transaction, particularly in this market are perhaps necessary.

A loan discount generally means you're buying down your rate. Not knowing when you locked that in, I can't say if 5.25 on a jumbo, for someone at a 740 FICO, 50% DTI, $616K,  72% LTV, in CA is bought down or not.  But if it's not a buydown, then "I" would sure like to know why it's on a line separate from the origination fee as there's no other "fee" for you to pay that fits in that category. And that .308 is a "fee" for something.

You also mention another $5K, what's it all for? Also, does the final GFE show any "compensation to lender/broker not paid by the borrower"? If so, that's ADDITIONAL profit. And if that item IS there, then that means you could have done better than 5.25% and NOT had the other .308 to pay.

I'm not saying anything's wrong with any of the above, if it works for you. Most people do second guess themselves when spending large amounts of money or going into major debt. Your concerns are natural. And I'm not trying to knock your broker. The tough thing for all of us here is that we don't know and can't see all the details.

So again, the bottom line is, if it works for you go ahead with it so you can execute YOUR plan. If it still doesn't FEEL GOOD to you, and that feeling is not based on the comments of the preceding paragraph, then there's probably something wrong with it, and your clock is still ticking, i.e., time is running out for you to get out of it.

And if "NO ONE" in that office can act on that file, (unbelievable), a quick "scare tactic" to get to the person you need to talk to is to let them know that because of your discomfort, if you don't hear from him by (whatever time), you're sending over a cancellation. TRUST ME, they'll contact him, and he'll be in touch!

Good Luck!

If you don't really need the funds, then don't take them. That simply increases your loan amount and thus, the amount your broker receives as part of their "1%", and your monthly payment on the loan.

Real estate will ALWAYS be a good investment if you're a buy and hold type of person, (and most times, even if you're not), particularly in your scenario. Unless you're tired of the "management" issues associated with a rental, and unless you can "profit" from the sale to a degree that exceeds your projected future income from renting it, since the other property is cash-flow positive, keep it (the property that is). Also, with the bulk of that debt being an equity line from the refi of your primary residence, if the cash out will allow you to pay it off, take the money, pay it off and get rid of the debt and increase your cash-flow, or don't pay it off since you're still cash-flow positve and invest elsewhere, or just sit on your liquid cushion. And you're right, you then still have the refi option.  

You're one of those rare ones today, sitting in a really pretty position. But again, tick tock!!!!!

You have a pretty solid loan in front of you. the .308% loan discount is a tax deduction and is paid to the lender to obtain the interest rate. 1% origination is inudstry standard...

Everyone gets paid for what they do. If you find a loan with lower closing costs, it's because the interest rate is higher. Lenders pay 'yield spread' to brokers to place clients into a higher rate of interest. If there is a buydown (loan discount) then there is no yield spread being paid. They've found you the lowest rate on the market available on the day you locked...

As for your costs being high, they seem to be in line with a par interest rate from anyone else. Don't want to pay so much? Talk to your broker about a higher interest rate. My guess is that 5.625% would eliminate his origination and the buydown (1.3%). However, do the math of how long this initial savings takes to offset itself in higher interest payments. If you don't plan on keeping the house any longer than a couple of years, this makes sense. If you do, sitck with what you have....

I gotta disagree with Drew regarding 1% being industry standard. 

I'm a one man shop, if the customer is quality---I'd rather get the referrals---like minded people tend to run in same circles.