A frugal refinance. . . .

With the low interest rates, I've been contemplating jumping in and grabbing a refinance on my first mortgage at least (which is currently at 6.59%). My problem has been that I hope to sell my house and move to a less expensive place in a year or so, and I don't want to pay the cost of refinancing if I won't recoup that. Also, the value of my home is now lower than it was when I purchased, and if I'm lucky it's worth about as much as I owe on it.

Anyway, I recently took a day off from work and printed out all of my financial information---bank statements, tax return, pay stubs, etc. I took this in to the bank which holds my first loan, and began the process of talking to the mortgage loan officer about possibly refinancing my loan. My ideal would be to wrap my second mortgage into the first, since I pay an astounding 8.9% on that one (and it's a balloon loan, meaning in 12 years or so, I'll have the pay the entire balance all at once).

The woman I spoke with had a stack of loan applications on her desk, but promised to get back to me within 24 hours. Five days later, I finally got her on the phone. She said that the bank had a new program that was no cost (no points, no fees, no NOTHING) and which guaranteed at least a point reduction in my interest rate---and I was approved for 5.37%. This is higher than the current rates hovering around 4.5%, but it's still substantially lower than the 6.59% I'm currently paying. She couldn't tell me whether my second mortgage would be rolled into one big one (my second is with a different bank, unfortunately). I'll find that out this week, when the paperwork arrives. The mortgage officer predicted that even by just 'modifying' the first loan, I'll save $200 per month!

After hanging up the phone I burst into tears, I was so relieved. I'd had no idea that my mortgage(s) were creating so much inner strife. I've been doing well with saving my money and planning for the future, and although my budget is tight and I'm working two jobs out of necessity, I feel much more secure (and lucky) than many people do right now. So I was a bit surprised at my reaction, to say the least!

Of course my pessimistic side is thinking that this is just too good to be true, and that when the paperwork arrives there'll be some hitch that the loan officer failed to mention in her very brief conversation with me. Then again, this might be just the thing that will allow me to breathe a little easier each month when my income falls next year. Heck, I might even be able to rent out my house without too much trouble and find a small, cheap apartment for myself, thereby saving more money and living closer to work (uh oh, there's my optimism rearing its shining head above the pessimism).

I'll let you all know how it works out!