Do I understand the home mortgage refinance that we finally
(finally!) completed? No, I do not. (*See below.) The HUD-1 statement, so beloved as a
truth-in-lending document, is gibberish to me. I have run the numbers many
different ways and many different times, and I still don't know what we paid
for this loan.
Why is a home loan so complicated? Some people tell me it's
because the banks deliberately have made this system obtuse. Not just opaque,
which means not see-through, but obtuse, which means difficult to comprehend. I
agree. I can't understand the pluses and minuses sprinkled throughout this
document, and I have tried.
For instance, line 103 is "Settlement charges to
borrower," from line 1400. Is that what we're paying for the loan? No. Why
not? The total includes amounts that would be in escrow already with our old
lender, plus new escrow amounts to be paid to our new lender. The dollar figure
also includes an adjusted loan origination charge that is a negative number. Clear as mud? I thought
so.
Okay, subtract all the escrow, and is that what we're paying
for the loan? Maybe. But then again, maybe not, because our new loan amount is
thousands more than the line 103 amount even when all the escrow is subtracted. So we go to line 104,
"Payoff of first mortgage." That dollar figure is thousands more than
what was owed on that date. But the refi document is paying that amount to the
original lender anyway, plus adding a couple thousand dollars to the new loan
amount. Okaaay...
We waited to get the refund from the original lender, sure
it would clear up everything. It didn't. The original lender refunded our
entire escrow balance with them (what would be paid for us in yearly real
estate taxes and home insurance). That's great. The old lender also refunded
the excess the new lender paid to close out the loan, minus the interest we
owed for the number of days that month during which interest had already
accrued. That seems straightforward enough, but there was no accompanying
statement that broke out those figures, so it took some thought to figure out
why the numbers didn't match at all. I got within eight dollars and called it
done.
You would think that at this point I would know what we paid
for the loan. Subtract the escrow refund, then subtract the remaining refund
from the new loan amount, and the difference between the old loan amount and
the new loan amount should be what we paid for the loan. But when I do that,
the cost of the loan is double what
the settlement costs are as listed on the HUD-1. And yet our loan origination
charges are listed as a negative
number, remember, so where did these other thousands of dollars come from? I do
not know. It's pitiful. What am I missing here?
Our first loan statement from our new lender is incomplete. It
does not break down the loan payment into principal, interest, and escrow. It also
does not list the amount paid at closing to start the escrow account. So I have
to either call the new lender again (since I've already called to make sure we
have been credited for the escrow amount) and ask for the details, or wait
until we receive our second loan payment invoice. Then I should know what the
starting figure is on retiring principal and paying interest on this new loan.
The purpose of finding this figure is to compare the old loan to the new
loan.
Why do I even want to know the details? Because if I plug in
these exact dollar figures in an amortization table available online, I believe
I can learn exactly when the remaining balance of the new loan will be equal to
the remaining balance of the old loan if it had continued. That could be many
months from now, or only a few. Here's the hypothesis as a visual:
The loan in red is the new loan. The loan in blue is the old
loan, which started after the last full payment to reduce the old loan, and started at a higher dollar amount. Eventually, the loans will meet, and at that point, the cost of the refi will be
amortized and we will start to regain payoff momentum.
But I think I have to wait yet another month for the rest of
the information, since the payments made this month have not been credited yet.
Yep. This is the refi that will not die.
***Hilarious update.***
Out of the blue, five years after the Refi That Will Not Die, we received a substantial check (over $1,000) as our part of a class action suit filed against our mortgage company. I guess others were shrewd enough to see through the mortgage company's double-talk and realized that we all were being overcharged.
***Hilarious update.***
Out of the blue, five years after the Refi That Will Not Die, we received a substantial check (over $1,000) as our part of a class action suit filed against our mortgage company. I guess others were shrewd enough to see through the mortgage company's double-talk and realized that we all were being overcharged.