APR vs interest rate when refinancing

[heyinternetman]

I'm no mortgage expert but I think I understand APR vs interest rate when getting a loan, (i.e. APR is your effective interest rate after they roll their fees into the loan, so basically it's your effective interest rate) and this one has me stumped. So I got a call from my current mortgage holder that they want to offer me a refinance from our current 4.5% $88,700 loan to to a $90,900 3.625% interest loan with an APR of 4.575%. We would keep our same payoff date and pay nothing upfront, everything is rolled into the loan. They say we will save $3,700 on the life of the loan. This seems fishy to me though, why is the APR so much higher than the interest, I know it's always higher but that seems like it's too much higher. So even though the interest rate of 3.625% is lower than my current 4.5%, if the APR is higher at 4.575% then in the end I'm actually losing money correct? My current interest rate is effectively = to my APR now because I've already paid the loan fees correct? Or at least I'm saving so little money there isn't much point in even doing the loan paperwork? We haven't decided yet but we may sell the house in 2 years and if we're adding $2,200 to the loan right now I'm thinking that would be a huge waste if we did.

We refinanced with them a few years ago and they were really easy to deal with and everything worked out fine, but my spidey senses are going off this time. They're really pushy about it, they've called me out of the blue several times this last week and used things like "our vice president would like to speak with you...", and "the paperwork is only good for 48 hours" all that stuff that just reeks of trying to pull one over on me.

I would love to hear any advice you have and if I'm misunderstanding APR vs interest rate please correct me, if I'm an idiot and should do this refinance then please let me know as well, thank you for the help.

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[heyinternetman]

I'm no mortgage expert but I think I understand APR vs interest rate when getting a loan, (i.e. APR is your effective interest rate after they roll their fees into the loan, so basically it's your effective interest rate) and this one has me stumped. So I got a call from my current mortgage holder that they want to offer me a refinance from our current 4.5% $88,700 loan to to a $90,900 3.625% interest loan with an APR of 4.575%. We would keep our same payoff date and pay nothing upfront, everything is rolled into the loan. They say we will save $3,700 on the life of the loan. This seems fishy to me though, why is the APR so much higher than the interest, I know it's always higher but that seems like it's too much higher. So even though the interest rate of 3.625% is lower than my current 4.5%, if the APR is higher at 4.575% then in the end I'm actually losing money correct? My current interest rate is effectively = to my APR now because I've already paid the loan fees correct? Or at least I'm saving so little money there isn't much point in even doing the loan paperwork? We haven't decided yet but we may sell the house in 2 years and if we're adding $2,200 to the loan right now I'm thinking that would be a huge waste if we did.

We refinanced with them a few years ago and they were really easy to deal with and everything worked out fine, but my spidey senses are going off this time. They're really pushy about it, they've called me out of the blue several times this last week and used things like "our vice president would like to speak with you...", and "the paperwork is only good for 48 hours" all that stuff that just reeks of trying to pull one over on me.

I would love to hear any advice you have and if I'm misunderstanding APR vs interest rate please correct me, if I'm an idiot and should do this refinance then please let me know as well, thank you for the help.

Anybody?

 

[bc65]

It sounds fishy to me too. Maybe they're charging you points and rolling them in?

The person at the bank or mortgage agency who gets you to refinance your loan is making a big commission. It's in their interest to get you to refinance, whether or not it's in your interest to do so. If you want to refinance, ask around at other banks or online to see if you can get a better deal, preferably one you can understand.

As a general rule, if I don't understand a financial product completely, I walk away. You should be able to understand everything. If you don't understand it, it's because they're trying to confuse you.

Confusion and slight of hand is how insurance agents get people to buy whole life insurance.

By the way, I always got my quotes when I refinanced at zero cost, so that way I could directly compare rates.

 

[dpmd]

This is not a good deal for a refinance.

 

[Psai]

So they charge you 2k more and tack on an extra 3.6%?

 

[InvestingDoc]

I'm no mortgage expert but I think I understand APR vs interest rate when getting a loan, (i.e. APR is your effective interest rate after they roll their fees into the loan, so basically it's your effective interest rate) and this one has me stumped. So I got a call from my current mortgage holder that they want to offer me a refinance from our current 4.5% $88,700 loan to to a $90,900 3.625% interest loan with an APR of 4.575%. We would keep our same payoff date and pay nothing upfront, everything is rolled into the loan. They say we will save $3,700 on the life of the loan. This seems fishy to me though, why is the APR so much higher than the interest, I know it's always higher but that seems like it's too much higher. So even though the interest rate of 3.625% is lower than my current 4.5%, if the APR is higher at 4.575% then in the end I'm actually losing money correct? My current interest rate is effectively = to my APR now because I've already paid the loan fees correct? Or at least I'm saving so little money there isn't much point in even doing the loan paperwork? We haven't decided yet but we may sell the house in 2 years and if we're adding $2,200 to the loan right now I'm thinking that would be a huge waste if we did.

We refinanced with them a few years ago and they were really easy to deal with and everything worked out fine, but my spidey senses are going off this time. They're really pushy about it, they've called me out of the blue several times this last week and used things like "our vice president would like to speak with you...", and "the paperwork is only good for 48 hours" all that stuff that just reeks of trying to pull one over on me.

I would love to hear any advice you have and if I'm misunderstanding APR vs interest rate please correct me, if I'm an idiot and should do this refinance then please let me know as well, thank you for the help.

I agree with the above poster that I trend to shy away from investment deals where I have a hard time understanding the numbers. Another red flag is them calling you and being very aggressive to make the sale. You have to think they are making money off you somehow as no one would be aggressive if they truly were not making any money off this deal.

My family taught me something a long time ago... You should never be rushed to sign a contact, especially one that you don't understand.

OP, even if you end up saving a couple of hundred dollars the upside return seems to be low( hundreds of dollars potentially) vs possibly a huge downside risk of adding >2k to your mortgage when you plan on leaving soon. Not to mention the wording of how the interest rate and loan are set up to make it very difficult to understand.

I say, walk away and find another bank to refinance, if they will let you on a loan that size. I have heard that once you approach 80k or less on a mortgage that many banks will not offer refinancing. Maybe this is why they are trying to offer it to you before it reaches their cutoff? (I admit that this is pure speculation)