When the COVID-19 homeowner mortgage waiver program was first announced last year, I insisted that we sign up. As a food and travel writer, I knew I would lose income. In the worst case, where we relied solely on my wife’s income to pay the bills, we would need to cut costs.
The mortgage waiver program will cut our biggest bill ASAP. With mortgage abstention plans, the lender pauses payments for a specific time and for a specific reason. In our case, it was six months and a global pandemic. Monthly payments are not forgiven, they are simply delayed.
As it turned out, I saved about a third of my income and brought in new customers during 2020, which resulted in less financial damage than I originally expected. In fact, we saved money with lower costs and CARES benefits.
By the time the six-month period of abstinence expired for the extension, we knew we did not need protection. Meanwhile, we were interested in refinancing our mortgage in order to take advantage of the interest rates that hit an all-time low…
But mortgage refinancing comes with a lot of rules, documentation, and requirements, including making at least three consecutive timely payments in the first place.
In fact, patience and refinancing are complex processes. Doing one thing after another: even more difficult. But this can be done.
Here’s what to expect when refinancing your mortgage for leniency.
Termination of mortgage in patience
To put an end to deferring mortgage payments, our lender provided us with two options. We could pay off missed payments in full, or postpone them until the end of the mortgage.
We chose the latter option, starting a series of mistakes that undermined our trust in our lender and convinced us that we needed to refinance to get away from them.
Our mortgage lender did not review our deferred payment application for two months. In the meantime, we have resumed monthly mortgage payments on their behalf.
But the mortgage payments went to the deferred amount, not the balance. Our monthly reports showed that our payments were delayed and not received.
We called the mortgage lender weekly, spending hours waiting or transferring to different departments. A sympathetic call center agent promised to get to the bottom of things and call us back the next day.
This was not the first time that our lender applied payments incorrectly.
Before we sent the check for the shortage of escrow, I called for instructions to make sure the payment was correct. I followed their instructions exactly, but they applied this check to my principal and not to the lack of escrow. Here they are again, screwing up our payments – and potentially delaying the entire process by pretending we didn’t make timely payments. After refraining from you, it will take three months of timely payments before you can apply for refinancing.
Finally, we filed a complaint with the Consumer Financial Protection Bureau. This caught their attention. The management solved the problem, but we planned an escape.
Want to refinance after patience? Shopping around is profitable
When our three-month period was up, we selected four mortgage lenders using a comparison service and then compared the interest rates and loan terms.
Three lenders had online mortgage applications secured by Fannie Mae and Freddie Mac. We entered our income, debt, and assets – everything including retirement and bank balances, my wife’s student loans, and our car note – then clicked Submit. Within an hour, these creditors called us.
Here are the mortgage rates we were offered for a 30 year mortgage backed by Fannie Mae or Freddie Mac:
- M&T Bank: interest rate 2.875%, interest rate 2.998%
- Chase Bank: interest rate 3.375%, interest rate 3.602%
- Citizens Bank: interest rate 2.625% per annum, 2.785% per annum.
- Local Bank: 3.125 interest rate on 30-year mortgages or 3% on 20-year mortgages (these rates were provided over the phone without document verification).
In each scenario, we will need to pay the closing costs, which lenders estimate are between $ 5,000 and $ 6,000. Some demanded that we pay for a credit report or appraisal.
Since the rate on our 30-year mortgage was 4 percent, refinancing didn’t have to bring huge savings in money every month. But lower monthly payments were no longer our primary concern. reason to refinance our mortgage.
We are tired of poor service from our current lender. We needed to have a mortgage lender we could trust, although it would take us about two years to recoup what we spent on closing costs and start saving money.
In the end, we chose Citizens Bank because their new loan terms were better and we were both clients for 10 years. Within a week of receiving the mortgage quotes, we committed to Citizens Bank to lock in our rate.
Terms of refraining from refinancing
It was October 2020 when we got out of the abstinence period and January 2021 when we compared purchases for refis. We fixed our new rate at the end of January.
Our new loan officer said we would close around April due to increased demand for both refinancing and new home purchases. For a long time we did not hear anything, then there will be a flurry of information requests, then we will finish. In the meantime, all we had to do was make mortgage payments on time and avoid new debt or credit rating changes. Yes, and clear up our current lender’s typo that made it seem like we owed $ 80,000 more than our home loan, something marked with our credit report.
On March 23rd we received a message: “Our loan is underwriting for initial approval.” Due to the high volume, they expected the closure to take place 120-150 days after our initial application was filed.
April turned into May. In the meantime, my wife received a new job offer. If she changed employers before we refinanced, we would have to wait another 30 days due to their proof of employment requirements.
The job offer ignited our lender: a few hours after she notified the lender of the new job offer, our loan was conditionally approved.
The bank required us to approve new terms for the loan, including an escrow for homeowner insurance and city taxes. We also needed to confirm that our city taxes were currently paid in full, provide updated payroll receipts, and explain our side income.
My wife had to call the credit bureau and our current lender to make sure we weren’t making late mortgage payments.
In the end, it took a few more phone calls, emails, and confirmations, but by May 17th we had officially refinanced.
Upholding the mortgage loan abstinence
It took me longer than I expected to transition from COVID-19 abstinence through the refinancing process. There were days when we had to drop everything and collect paperwork for our new lender or put everything on hold to try to clear our mishandled account for the 27th time.
In the end, our mortgage payment is $ 100 less, but we will save $ 50,000 over the life of the loan thanks to the lower interest rate. Walking away from a terrible lender I didn’t trust to do something right? It was priceless.
Written by Penny Hoarder Lindsay Denis, a Hudson Valley, NY-based writer specializes in food, freelance advice, and personal finance. Her work has appeared in Business Insider, NextAdvisor, Greatist and others.
This was originally posted Penny drive, a personal finance website that empowers millions of readers across the country to make smart money decisions with actionable and inspiring advice and resources on how to make, save and manage money.