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I went through 3 refinances last year (also in CA) all at little to no closing costs for a 30 year fixed (4.00% → 3.25% → 2.5%). The math made sense every singl

I went through 3 refinances last year (also in CA) all at little to no closing costs for a 30 year fixed (4.00% → 3.25% → 2.5%). The math made sense every single time when factoring in the lower monthly payments and negligible closing costs. At this point I don't know what the point of the loan is anymore. Is there really any realistic intention to ever pay it off? Every single time I thought I had timed the bottom, but rates continue to drop.

lostmsu 6y ago
How come you had no closing costs? How much really they were?
- acwan93 6y ago
  My broker said it was a standard $3K closing cost if at zero points, but I ended up taking some negative points as a credit towards closing costs.
- tathougies 6y ago
  I refinanced last year for a 0.125% better interest rate, and the bank paid me $1000 to do it. It was the easiest decision I ever made. Basically, there was $5000 in closing costs and the bank paid me $6000 in points. If I paid money I would have gotten a lower rate, but I already had a great rate. Now, I'm refinancing again, but I'm paying some money. All in all, my net refinancing costs will be around $2000, but I have halved my interest rate almost, and will now be able to pay my home off about 10-15 years earlier (we just bought two years ago).
nostrademons 6y ago
The point of paying off loans at this point is so that when the whole system breaks down and people are looking for someone other than themselves to hold the bag, you have no business relations with anyone and nobody with a reason to point at you. Folks who are deeply entangled in the financial system will have a lot of potential enemies if the system fails to supply the expected standard of living to everyone. Folks who are basically self-sufficient with no major financial commitments can ride it out in obscurity. "Neither a borrower nor a lender be / For loan oft loses both itself and friend." -- Polonius, from Hamlet
- njarboe 6y ago
  If you own property there is not obscurity or hiding from the system. Your name is on the dead and on view for the public (especially with the new law recently passed restricting the privacy of shell corps).
  - nostrademons 6y ago
    Right, but the point is to avoid people caring about you, not people knowing about you. It's fine to have your name out there and on some public records about where you live if everybody is indifferent to your existence. It gets dicey when you owe somebody money, and they owe somebody else money, and then when there's not enough money to go around they're like "Shoot, where can I find some money? I know, I'll turn the screws on people who already owe me something and just collect what I'm owed." Little details like the precise payback terms of the loan and recourse available tend to get lost when court systems aren't functioning, and people only think "Oh, who owes me money that I can collect from?" (As a side note, this is an important and often-overlooked point about mass surveillance. There's a huge difference between large data-hoovering organizations knowing about you and large organizations caring about you. Most people's best defense against identity theft or blackmail isn't cybersecurity, it's boringness, and the law of large numbers.)
marvin 6y ago
I've never understood mortgage refinancing in the US. Isn't the lender taking a loss when you refinance, since their 20-year asset will now pay less in interest than before? How does the lender make up for this loss, if the debtor isn't paying the difference every time they refinance to a lower interest rate?
- adventured 6y ago
  The lender has no practical alternative in most cases other than to reject business outright. The reason they go along with it mostly willingly, is the borrower can typically go somewhere else for the loan. The current lender would just as soon keep you as a customer at 2% (vs the old 4%) than see you go somewhere else. They don't make up for the loss, they accept the lower rate of return vs losing the customer entirely.
  - marvin 6y ago
    Fascinating, thanks for the info. In Norway, fixed-rate mortgage agreements are always made with a clause mandating settlement of the interest difference, in the case of refinancing or early repayment. The customer therefore has no leverage over the lender by threatening to take the loan elsewhere. They'd have to pay all of the remaining interest if they wanted to settle the loan, or at best settle the interest difference if moving the loan to a lender with a different interest rate. Assuming both banks agreed to the exchange. Of course, if interest rates increase, such settlement could also favor the borrower. But that hasn't been the case in a long time. Most mortgages here are floating-rate.
- imtringued 6y ago
  If you have a $1 million mortgage with 5% interest you are paying $50k interest per year. Meaning you are paying most of your interest at the beginning of the loan. If you are down to $750k after 10 years and refinance to 2% you have already paid around $350k in interest . The bank has already gotten the biggest chunk of the profits but takes a "loss" on the remaining portion.
saberdancer 6y ago
I refinanced my loan once, it took me 5-6 trips to the bank and bunch of signed papers. My rate is low enough and loan short enough that I won't do this again but the whole process in one of EU member states was quite slow and annoying. Is this better in USA?
- frockington1 6y ago
  When I refinanced it was one phone call and then e-signed a document. And a week or two later someone drove to my house to get a wet signature to complete everything. It was with the same lender though so may have been streamlined because of that.

lostmsu 6y ago

How come you had no closing costs? How much really they were?

acwan93 6y ago
My broker said it was a standard $3K closing cost if at zero points, but I ended up taking some negative points as a credit towards closing costs.
tathougies 6y ago
I refinanced last year for a 0.125% better interest rate, and the bank paid me $1000 to do it. It was the easiest decision I ever made. Basically, there was $5000 in closing costs and the bank paid me $6000 in points. If I paid money I would have gotten a lower rate, but I already had a great rate. Now, I'm refinancing again, but I'm paying some money. All in all, my net refinancing costs will be around $2000, but I have halved my interest rate almost, and will now be able to pay my home off about 10-15 years earlier (we just bought two years ago).

nostrademons 6y ago

The point of paying off loans at this point is so that when the whole system breaks down and people are looking for someone other than themselves to hold the bag, you have no business relations with anyone and nobody with a reason to point at you. Folks who are deeply entangled in the financial system will have a lot of potential enemies if the system fails to supply the expected standard of living to everyone. Folks who are basically self-sufficient with no major financial commitments can ride it out in obscurity. "Neither a borrower nor a lender be / For loan oft loses both itself and friend." -- Polonius, from Hamlet

njarboe 6y ago
If you own property there is not obscurity or hiding from the system. Your name is on the dead and on view for the public (especially with the new law recently passed restricting the privacy of shell corps).
- nostrademons 6y ago
  Right, but the point is to avoid people caring about you, not people knowing about you. It's fine to have your name out there and on some public records about where you live if everybody is indifferent to your existence. It gets dicey when you owe somebody money, and they owe somebody else money, and then when there's not enough money to go around they're like "Shoot, where can I find some money? I know, I'll turn the screws on people who already owe me something and just collect what I'm owed." Little details like the precise payback terms of the loan and recourse available tend to get lost when court systems aren't functioning, and people only think "Oh, who owes me money that I can collect from?" (As a side note, this is an important and often-overlooked point about mass surveillance. There's a huge difference between large data-hoovering organizations knowing about you and large organizations caring about you. Most people's best defense against identity theft or blackmail isn't cybersecurity, it's boringness, and the law of large numbers.)

marvin 6y ago

I've never understood mortgage refinancing in the US. Isn't the lender taking a loss when you refinance, since their 20-year asset will now pay less in interest than before? How does the lender make up for this loss, if the debtor isn't paying the difference every time they refinance to a lower interest rate?

adventured 6y ago
The lender has no practical alternative in most cases other than to reject business outright. The reason they go along with it mostly willingly, is the borrower can typically go somewhere else for the loan. The current lender would just as soon keep you as a customer at 2% (vs the old 4%) than see you go somewhere else. They don't make up for the loss, they accept the lower rate of return vs losing the customer entirely.
- marvin 6y ago
  Fascinating, thanks for the info. In Norway, fixed-rate mortgage agreements are always made with a clause mandating settlement of the interest difference, in the case of refinancing or early repayment. The customer therefore has no leverage over the lender by threatening to take the loan elsewhere. They'd have to pay all of the remaining interest if they wanted to settle the loan, or at best settle the interest difference if moving the loan to a lender with a different interest rate. Assuming both banks agreed to the exchange. Of course, if interest rates increase, such settlement could also favor the borrower. But that hasn't been the case in a long time. Most mortgages here are floating-rate.
imtringued 6y ago
If you have a $1 million mortgage with 5% interest you are paying $50k interest per year. Meaning you are paying most of your interest at the beginning of the loan. If you are down to $750k after 10 years and refinance to 2% you have already paid around $350k in interest . The bank has already gotten the biggest chunk of the profits but takes a "loss" on the remaining portion.

saberdancer 6y ago

I refinanced my loan once, it took me 5-6 trips to the bank and bunch of signed papers. My rate is low enough and loan short enough that I won't do this again but the whole process in one of EU member states was quite slow and annoying. Is this better in USA?

frockington1 6y ago
When I refinanced it was one phone call and then e-signed a document. And a week or two later someone drove to my house to get a wet signature to complete everything. It was with the same lender though so may have been streamlined because of that.