Our Mortgage Refinance is Done

It took some time, but our mortgage refinance is done. It was a TRUE no-cost refinance, which don’t come around very often. We really did not pay a penny for it or anything associated with it. The last time we got a no-cost refi was in 2008.

We refinanced from a 20-year fixed at 4.625% to a 5-year ARM / 30 year at 3.25% — dropping our interest rate by 1.375%. It also dropped our required monthly payment to around $215 a month.

Yeah, that’s a ridiculously low monthly payment. That’s part of the appeal of adjustable rate mortgages that start at very low rates, I guess.

Why we chose an ARM

While I wouldn’t normally think adjustable rate mortgages were a good idea, as with anything it’s important to consider the individual situation before making a decision. In our case, worst-case scenario is that we’ll have the mortgage paid off before it adjusts for the first time 5 years from now.

Which brings me to the real reason our payment is so low: our mortgage balance is also very low. We’ve been working hard to get it paid off completely, and it shows, because we don’t have that much left to go. We ended up borrowing $49,500.

Tying up loose ends

$1324.50 of that will be immediately applied as a principal reduction. The difference between what we borrowed and what we owed was due to a last-minute discovery. The credit union’s calculation of what we needed to borrow to didn’t take into account the fact that we’d already paid our taxes and insurance, so they needed to give us a credit (which we opted to have go straight to principal.) It pays to go over the HUD-1 form carefully and question anything you’re unsure of.

I’m happy with our refinance because we’ll be paying less in interest — and every little bit of savings helps. That will help us to pay off the mortgage ASAP, because even more will go to principal as we continue to pay our old monthly payment (+ extra amounts).


  • hmm I thought that ARM were the problems for many in the first place. Surely you are in a better situation than most and clearly understand how they work. Sadly so many people got into ARM not understanding that they could barely afford the first 5 yrs of the ARM not to mention how it would jump. ARMs are great for those who can truly afford what the end monthly payments will be.

    • Yes, I think people taking out ARMs and interest-only loans while assuming that life would always be rosy and continue to improve was a big part of the problem.

  • ECN

    Congrats on finding a real no-cost refi. Were you able to stay with your existing credit union? or did you have to find another lender?

    If you were able to stay with your existing CU (a big plus for me) … was this an advertised product, or did you work something out with them?

    Thanks for the info! (And mega-kudos on almost having the house paid off! I can’t wait for us to be that close).

    • We were able to refi with the same credit union that had our existing loan. It was an advertised product. In fact it’s still available on their site.

  • Congrats on a great refi and for getting an ARM when it makes sense!

  • Congrats on the refinance! Can’t wait until your mortgage free!

  • I am so completely jealous. I very much want to refinance our house, but due to falling market values and the fact that our loan is not owned by Fannie or Freddie, we can’t do that without incurring PMI. So we stay with what we have.

  • Nice job! I’m doing a 5/1 at 3.125% myself for my primary, and 3.375% for my rental. All the costs are baked in.

    Do you still have a goal of paying off your mortgage this year?

    • Nice. And yup, we still have that goal but while I haven’t given up hope (and we’re still putting in the effort) it’s not looking too likely.

  • I’ve got a friend who’s scared to death of his ARM coming due, but he over-extended to buy his house.

    • That’s too bad he overextended. Seems like a lot of people made that mistake. Maybe he’ll luck out though and his ARM won’t adjust up.

  • Don’t ask me why, but in my state, MA, this is not allowed. When my buddies were getting free no cost refi’s with wells fargo in different states, they told me they weren’t allowed to offer it in my state. So sad…but I’m glad for you. Every little bit helps.

    • Are you sure it’s that your state did not allow them to offer it, and not that Wells Fargo wasn’t offering it in your state? (And so the Wells Fargo person “wasn’t allowed” to offer it?)

  • I looked into refinancing at our credit union but the cost made it not worth the hassle. We owe about the same as you and want to definitely pay it off in 5 years.

    Does your credit union have branches in California?

    • We have our mortgage (and did the refi) through Pentagon Federal Credit Union. I don’t actually know where they’re located. Oregon maybe? They have a large list of groups on their web site that qualify you for membership, so we just joined one of those and then the CU. I like it because they allow online payments and have always been helpful when I’ve called. The great mortgage rates are obviously the benefit we were most interested on though!

  • Those are amazing rates and it may lead to many others to consider an ARM. They are not bad products. Our rate is not too bad though and our payment with taxes and insurance is still pretty manageable.

  • Great choice you made! I wish I could get a no-cost refinancing option right now myself.