Mortgage Refinance Lessons Learned

Home, Sweet Home

Housing in and around DC is expensive, but we love our house and our neighborhood. I wouldn’t mind if it were smaller (in fact, if my spouse would let me, I’d begin construction on a tiny house in Montana tomorrow), but the fact remains that I couldn’t think of a better place to raise our family right now.

We bought our house nearly three years ago, without anywhere near 20% down, so we’ve been paying Private Mortgage Insurance (PMI) — $8250 so far, to be exact. It’s an incredible waste of money.

So a few months ago, I started researching how to get rid of PMI and we finally decided to refinance. I naively thought that it would be a breeze because we already own the house, so we wouldn’t have to wait for a specific closing date, right? Sign the papers and bam we’ve got a new mortgage! Wrong.

We chose PNC Mortgage because we already have a checking account at PNC and the rates and fees were decently competitive. We applied officially on January 8, but didn’t close until March 9. First, the paperwork came, but was laden with errors. (For example, Nathan’s social security number and birthday were wrong. Apparently the bank wasn’t worried that I’d married a 63-year-old Park Ranger.) It took a month and a half to get that changed. Later our house was listed as being in Georgia. The change to put us in the right state (Virginia) was not made officially until the closing day. Day after day something new would go wrong. The loan processor would disappear for extended “sick leave” or “vacation” or the bank would wait until the last minute to check our employment status or file for the new title. As the closing date drew near, we had to sit through our loan officer and loan processor yelling at each other via email. It was the most unprofessional process I’ve ever been through. While we waited, the fees rose a bit and our target closing date of Feb 26 came and went without the bank proactively keeping us in the loop. I had to pay another month of our expensive mortgage and squeeze in a closing date between travel and a major quarterly meeting. The rates had since gone up, so we were stuck with PNC’s locked-in rate unless we wanted to pay a lot more over the life of the loan to switch banks.

Why am I telling you all of this?

Mortgage Refinance Lessons Learned

  1. I wouldn’t use PNC Mortgage again. Ask friends for referrals (which I did) and be patient enough (which I was not) to use one of them instead of someone you find on your own.
  2. Set expectations low and be patient. Refinancing is a major pain and takes a long time. Be prepared for that when you start.
  3. Refinance at a time when you’re not busy. Just like buying a house, it takes a lot of back and forth to refinance. Do it when you’re not busy and at a time when you won’t be out of town around closing day.
  4. Save what you save. It was easy to start thinking about where I’d re-appropriate the money saved, but instead of finding a creative way to spend our newfound cash, I’m saving it. It will likely go into a major home maintenance project someday, but for now, it’s just earning me interest in the bank.
  5. It was worth it. We saved nearly $400 a month after refinancing and many thousands of dollars over the life of the loan. There are many calculators like this one and this one that can help you decide whether to refinance and will show you how long you need to stay in your home to start making a return on investment.

Do you have any refinancing advice? Share it!