Balance on "no-cost" HARP refinance is higher (loan, escrow, credit report)

[coolcats]

I was offered a no-cost HARP refinance by my mortgage company (Wells Fargo). They assured me I would have to pay no closing costs and my mortgage balance would remain the same.

I received the closing documents in the mail today. The balance on the new loan is about $1,200 higher than the balance on my current loan ($134,000 vs $132,800). Is there a rational explanation for this increase? Should I challenge the bank on this?

I will probably still go through with it because the interest savings are so great. It's just irritating that the balance is more, when they said it would not be. I doubt any customer would ever see their loan balance decrease by $1,200.

[aneftp]

The $1200 difference is cause of the month you are asked to " skip".

It's essentially one month of interest that is added to the balance since you don't pay for one month.

If it bothers you, just prepay the $1200 extra into the principal for that month you skipped.

I just did the streamline wells Fargo myself.

Took me a little but to do the math. They added $1800 to my balance cause I was asked to skip jan 2012 payment.

That's one month of interest added for me.

So I just went ahead. Paid the $1700 in interest to apply to the principal for my "skipped month". And also paid Feb 2012 mortgage payment.

Simple. That's how you solve the added "$1200" problem you have with the streamline.

[coolcats]

That makes sense. I'll apply my savings from not paying in February to paying down the principal.

[Bob468]

Keep in mind when you pay your February payment, you are paying January's interest. So when the refinanced loan begins, you will not have payed the current month's interest. So they are adding that amount (possibly 2 months of interest, to account for the next month) to the amount you are borrowing.

[majidmo]

Originally Posted by coolcats

I was offered a no-cost HARP refinance by my mortgage company (Wells Fargo). They assured me I would have to pay no closing costs and my mortgage balance would remain the same.

I received the closing documents in the mail today. The balance on the new loan is about $1,200 higher than the balance on my current loan ($134,000 vs $132,800). Is there a rational explanation for this increase? Should I challenge the bank on this?

I will probably still go through with it because the interest savings are so great. It's just irritating that the balance is more, when they said it would not be. I doubt any customer would ever see their loan balance decrease by $1,200.

To figure out you are getting a better offer than your current loan, then laon end date should be also the same as original. For example, if you are 4 years into a 30-year loan, then you need a 26-year loan. Then assuming the balance is the same and your monthly payments have decreased you MIGHT be able to say you are getting a better deal.

[Matt7707]

You pay your mortgage in arrears. The balance is higher because you skipped a month's payment at the beginning of the current loan just as you will with the proposed loan. And no, you don't have to apples to apples as far as term goes. My guess is if you are 4 years into a 30 year loan at say 5.5% (26 years left), if you refi to a new 30yr at 4% and take the full 30 years to pay it off you will still come out ahead.

[Pfhtex]

Three things in play here:

1) Refer to your actual payoff statement, not what is on your credit report.

2) Also, there may be a reset of an escrow account going on, in which case you may receive an Escrow Refund check from your present servicer in about a month.

3) You are paying prepaid interest from the date of funding to the calender month-end date of the month in which the loan funds.