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Peter Thompson 2626 Warrenville Road Downers Grove, IL 60515 Direct Line: (630) 598-2375 Cell Phone: (630) 479-6424 |
PeterT@promortgagepartners.com
Free refinance Guide – Avoid the mistakes that can cost you thousands
Questions? Whether purchasing a new home or refinancing, let me know how I can help.
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Your privacy is important to me. Your information will not be shared, sold or exchanged with anyone else and I will contact you personally by phone or email.
Illinois Residential Mortgage Licensee #5814
The No-Cost refinance
When rates are down, the biggest obstacle to homeowners lowering their payments and taking advantage of the low rates is the cost of refinancing. As we discussed in the Payback article, the more that the loan costs, the longer you will need to be in the new loan before refinancing makes sense. So if a loan costs a lot upfront, it takes a big improvement in the rates before it is worth doing. On the other hand, if there are no costs at all, a reduction of a small amount in the rates can save you a lot of money over time.
With a no-cost refinance, we are using the yield spread premium (the money that the lenders pay the mortgage broker to bring them the loan) to pay for the closing costs. When we price loans we have several different options. Every day the lenders we deal with send us new price sheets. These sheets have matrixes which allow us (the mortgage banker) to price the loan in different ways. I usually price a loan to show no points or origination fees, but with the normal costs being paid at closing. If someone wants a lower rate, I can price it so that they pay more money upfront and get a lower interest rate. We can also do it the other way, offering them a slightly higher interest rate means that the lender pays us a higher premium, which can then be used to cover all of the loan costs. This program isn’t available with all lenders, but is available with many mortgage brokers or mortgage bankers.
Here is how it works. Let’s say you have a mortgage with a balance of $200,000 and an interest rate of 6.75%. This loan would have a monthly payment of $1,297 for principal and interest. Let’s say that rates drop. If you are able to refinance at 6.0%, your new payment will be $1,199, for a savings of $98 per month with closing costs of $2,000.
If 6.0% is available with closing costs, the rate with no closing costs would be around 6.25% (it would be less if the loan was larger). This means a payment of $1,231 and a savings of $65 per month. The monthly savings are lower, but you save $2,000 up front. This works especially well for people who don’t plan on being in their home or their mortgage for a long period, or if you think that the rate trend is going down and there may be more opportunities to refinance and lower the payments again down the line.
These loans are more attractive when the loan amount is higher. In many cases we can do a no-cost refinance for the same rate as other companies are doing full cost loans. Smaller loans, those under $150,000 are harder to do without any cost. For many people this is the best option.
Testimonials
- “I felt he went above and beyond his job. Very satisfied."
Terry S.
Chicago, IL - "This was my first mortgage and he held my hand all the way. It was a great experience."
Rosaria A.
New Lenox, IL - “Pete Thompson was extremely helpful. He was honest and service oriented. After reading his homebuyer’s guide, I knew what to expect. We will definitely use Pete again, and refer him to all our friends.”
Wayne and Beth B.
Lemont, IL - “Pete Thompson understands our needs. He answered all our questions and made the loan process simple and easy. He was great.”
Bob and Sherry R.
Chicago, IL - "Pete Thompson was great! Helpful, friendly, he went out of his way to make us feel good. I've already passed his name on to my brother, and recommended him strongly."
Jason W.
Chicago, IL - "Pete made everything so easy. We'd heard horror stories from friends who had bought earlier, but it all went great. He made it effortless on our part."
Dan and Sherrie P.
Wheaton, IL - "Pete Thompson was very helpful and informative. I was very happy with the services I received. As a first time buyer with no money down I didn't know what to expect."
Mike B.
Oswego, IL - “Pete was extremely helpful. We felt very confident with his expertise and information. Everything went very smoothly.”
Mike and Monica A.
Glen Ellyn, IL - “An outstanding professional! Pete is the best!”
Daniel and Peg O.
West Chicago, IL - “Pete Thompson was great! Helpful, friendly, he went out of his way to make us feel good.”
Kathy N.
Winfield, IL - “Very nice to work with. Very efficient service.”
Harry and Mary S.
Naperville, IL - “Pete handled the entire process with the professionalism and courtesy I try to show clients in my business.”
Cynthia B.
Chicago, IL - “I knew what to expect upfront, and everything happened just as Pete said it would. A great experience.”
Nick P.
Bloomingdale, IL - “Pete was efficient, thorough, enthusiastic, informative, responsive and proactive in all our dealings with him. It was an honor to work with him.”
Mark and Daphnee M.
Naperville, IL - “Everything was totally professional and seamless – greatly appreciated.”
Richard and Jeanie S.
Huntley, IL - “Pete Thompson made my financing end of buying a home far less stressful than in the past using other mortgage companies. Thank you, Pete.”
Jerry P.
Bloomingdale, IL - “I relocate regularly, and have bought several homes in the past. The level of service I received from Pete and his team was second to none!”
Roman S.
Oak Lawn, IL - “The service was very good and it was a pleasure working with you. I am sure we will be in touch in the future.”
Ron and Lisa S.
Naperville, IL - “I was not sure what to expect, but everything went so smooth it was surprisingly easy. Having the information upfront really made a difference.”
John T.
LaGrange, IL - “We counted on Pete to take care of everything because we lived in Wisconsin. It couldn’t have been handled better.”
Robert and Karen H.
Lombard, IL - “Excellent service. Pete was a pleasure to work with.”
Kent S. and Edward.
Chicago, IL
