5.85% Down to 3.125% Mortgage Interest Rate With No Cost? No Kidding!

With today's record low mortgage rates, refinancing is a very good way to save money if circumstances allow.

Since we purchased our home in 2008, we have refinanced 4 times (Yes! that's 4 times!) and reduced our interest rate from 5.85% to 3.125%.in just 4 years That's 2.725% difference that helped us saved thousands of dollars in mortgage interests every year. And of course, it lowered our mortgage payments tremendously! And we have done this without any closing costs at all.

How did we do this without costing us any money? Well, the answer is fairly simple. In short words, we asked the lender to bump up the interest rate a little bit (between .125% to .25%) so that we'd get a lender credit that would cover our closing costs. For example, if the loan was $250,000 and the best rate was 3.5% with closing costs of $1,709, the lender could bump up the rate of .125% difference to 3.625% so that we would get a credit of $2,300 which would be big enough to pay for our closing costs. We might not get the best rate of 3.5% but 3.625% is not bad at all especially if our previous rate was in middle 4s or 5s. The illustration below taken from Amerisave.com contains sample values but would explain this better:

Now, keep in mind that the lender credit that you would get would depend on the amount of the loan. The higher the loan, the less interest rate increase to cover the closing costs. And of course, the better your credit score is and the lower your Loan-To-Value (LTV), the better rate you get.

We have used different brokers to refinance our loans and we always used the ones with the lowest rates at that time. The ones we've used were Amerisave.com, absolutemortgageco.com, themoneystore.com (this one is not recommended as we had bad experience and assetmutualmortgage.com.

If you want to refinance, I recommend going to zillow.com or bankrate.com to find a broker that has the lowest mortgage rates and would offer no closing cost refinancing.

Now that our rate is at record low (3.125%), we will never have to refinance this loan again and we are on the way to paying off our loan in less than 15 years!

Mortgage Escrows - How To Make Money By Canceling Them

Many of us who are lucky enough to buy our homes have mortgages that we pay every month. Normally, when you get a mortgage, lenders ask you to escrow the Taxes and Insurance to get the lowest rate possible. When you escrow, you pay your taxes and insurance as part of your monthly payment and the lender keeps the money in an escrow account and pays your taxes and insurance when they come due. By doing so, you actually your taxes and insurance in advance.

Most of us think that it is a good thing for many reasons. For one, we can ensure that we have money to pay our taxes and insurance when they come due. For another, we don't have to come up with a big sum of money at some point to pay for our taxes and insurance and risk not paying them.

To some degree, I agree with that! However, many of us do not realize that by doing so, we are doing the lender a favor instead of doing a favor to ourselves. Yes, escrow makes sure that we can pay your taxes and insurance which is good for the lender! That's why they do that in the first place. However, escrowing our taxes and insurance  is like putting our money in a safe or under our beds making nothing!

Instead of escrowing your taxes and insurance, why not put your money into a savings account that could make up to 3 or 4% annually? Don't touch it, don't even think you have it, and when needed pay your taxes and insurance and then keep the interest it gained?

That's what we do! For our mortgage in Bolingbrook, I immediately canceled my escrow as soon as it was eligible. I do a direct deposit equivalent to the monthly amount that we are paying for the escrow into a high-yield savings account that makes 3% annually. When taxes and insurance are due, I withdraw enough amount to pay for them, and keep the interest to ourselves. Our taxes in IL is more than $8,000. Very high I know and it is even higher in other states and even higher if you have a more expensive house! By keeping them in savings, at least they earn about $200-300 that we get to keep.

Lenders normally allow borrowers to cancel their escrows if their Loan to Value is less than or equal to 80% and that they have been paying on time for at least 6 months. Just one thing to keep in mind.

I can't wait to cancel our escrow for our mortgage in FL when it becomes eligible!

A Call From Our Current Bank

Just very recently, I received a call from our current bank. The lady asked me that she is calling because she noticed I transferred a big chunk of our savings out of their bank and she wanted to make sure that my banking experience with them is going well.

I simply thanked her for calling and told her about the Kasasa account and how we would make triple interest rate than what they're giving.

4% Interest, Without Fees: Too Good to Be True In The Current Market?

I recently read from CNBC a feature about a Kasasa Account (http://www.kasasa.com) that local banks and credit unions are offering. The article was titled "4% Interest, Without Fees: Too Good to Be Checking?". That does sound too good to be true, but I still checked into it and did my own research.

Sure enough, that is true. Depending on where you live in the country, you could really make up to 4% on your checking nowadays through a Kasasa Account. In my case, now that we live in Florida, we can only make up to 3%, but still relatively good rate in the current market.

Now there is a catch in those type of accounts in order to get qualified but they are things that we normally do anyways such as using a debit card at least 12 times per month, signing up for eStatements, and Online banking. So it's not really a big deal. And for some reason, we won't qualify, we won't have to pay any fee and still make the same rate (if not more) that Citibank or Bank of America and others would give us (usually less than .1 percent - note that decimal point) =)

So I did my research, made sure that the bank is legitimate and FDIC insured (throug fdic.gov), opened an account right away, and am in the process of transferring our savings! I am excited to earn up to 3% on our savings just like in year 2005!!!

No More Free Lending Money To IRS

We just filed our taxes this week and we are glad to see a big refund. However, while it feels good to get a refund during tax season, it's not really a smart thing to do because that means we are lending  money to the IRS for free. And we won't even get the refund on time! So I figured, why not put that extra money to a high-yield savings account and make it work for us?

So here's what we are doing moving forward:

• We are reducing tax withholding with payroll so that we won't overpay our taxes.
• That extra income that we are getting every month, we are putting that into a high-yield savings account that makes at least 3% annually. A Kasasa Cash account is currently a one good way of doing this since most of the savings account earn nothing. We are doing a direct deposit so we won't even see that extra money. It still feels like overpaying our taxes to ensure that we won't owe taxes at the end of the year, but that over-payment goes to a savings account instead and is making 3% in interest. That is $30 for every $1,000.
• Only key is, we better make sure we won't touch that money! That is exclusively tax money! We know  that that requires self-discipline.

So next tax season, we won't be expecting a refund from the IRS. We won't be waiting for the IRS to update their tax system so we can file our return and get our refund! But we will have enough money in the bank to cover the taxes. And that extra? We can withdraw it anytime plus interest.

Read more: http://www.trendingonlinenow.com/