Is it time for me to refinance? My mortgage origination company thinks so

White elephant statuePhoto courtesy of Jyle Dupuis

I closed on my home almost two years ago. And while I made the terms a little longer than I needed to, my plan currently is to pay it off as if it were a 15 year mortgage.

As I’ve written about before, my most pressing task is removing Private Mortgage Insurance, which I need to pay until I’ve built up somewhere between 20-25% equity. (I’ll have more updates on this in a future post.)

But I received an interesting email from someone at my mortgage originator. Paraphrasing, he said that he thought he could lower my rate, shorten my term, and remove PMI. Was I interested?

Good question.

Is this a scam?

My first thought was: Am I being scammed?

Call me a little paranoid, but that’s usually the first question that comes to mind when I’m solicited for an offer. That said, when someone says that they can save you money, and it’s a service that they’re selling, it’s worth it to be very skeptical.

How would he know?

My second thought was: How would he even know?

I’m calling it my “mortgage origination company” and not my mortgage company because they aren’t my mortgage company. Not anymore.

Mortgages, once sold, get passed around like gifts at a white elephant exchange. My own has been sold/purchased twice, once to an odd/small lender about which I could find almost no information, and then to a Major Mortgage Company, which is where it is now.

Now correct me if I’m wrong, but there isn’t a way for mortgage companies to dig into the details of a mortgage they don’t own, right? (Please tell me this is the case.)

If not, then it could only mean one thing: he doesn’t know whether there’s a better deal out there for me, but wants to solicit my interest anyway.

Which leads me back to my first thought all over again.

Is there a deal here?

My third thought was: What kind of deal could I get?

Recall that there were three carrots the person extended to me as possibilities:

  • Lower my rate
  • Shorten my term
  • Remove PMI

The lower rate is the most compelling one, as that’s where lots of money can be saved. But can it be done?

The current average rates for mortgages are about the same as they were two years ago when I closed. Would I be able to get a rate change more than 1% to make it even minimally worthwhile? I highly doubt it.

Not much has changed in two years. Source

Now, rates are typically a little lower for 15 year fixed mortgages than they are for 20-30 year fixed mortgages. So it’s possible that if I were to convert my 25 year into a 15 year, then I could save some money there.

But again, how much are we talking about here? And how much would closing costs be? How long until I see that extra savings? Call me skeptical that it’s worth it.

As for a shorter term, I don’t need anyone to do that for me. I already am paying extra each month.

And as for removing PMI, the only way anyone can remove it is if I have less than 80% LTV (loan to value), meaning that I’ve got more than 20% equity. Unless he’s banking on increased equity due to the white-hot Portland market, or making me put down more money. Which, is what I’m working on every month, thank you very much.

Do I even ask?

On balance, I can’t see any good deals for me here. Minimal upside, larger downside, and maximum hassle. Thanks I’ll pass.

I think this was just that the origination company doesn’t own my loan anymore, but they do have my email address and my history with them, and the money they can make through owning my loan once more is worth the occasional marketing email.

But then again, I still wonder if I should write him back. I don’t want to assume that I know everything there is to know about mortgages. Maybe there’s more to the story here that I don’t know about. Is it worth it?

What do you think, should I ask for more information? Or should I let it go? I’d love to hear your thoughts below.

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

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Mike Pumphrey
Posted on July 3, 2017