Refinancing may get you a lower mortgage rate and save you money. However, there are also fees involved and as one homeowner found out, you should add them up before signing on the dotted line.
Chris Emerson of Palo Alto plans to retire someday a country home in Northern Maine. So, while he lives and works in the Bay Area, he's paying off the mortgage back in Maine.
"Interest rates have been going down again, so we thought let's take a look at refinancing it," he said.
Chris contacted his lender, Citibank Mortgage. An agent said he might qualify for a reduced rate, of less than 5 percent, so Chris went for it. He charged the $545 application fee to his credit card and hung up.
However, just moments later, Chris had second thoughts.
"When I looked at all the costs to refinance all the upfront fees, the appraisal fees and so forth, it really wasn't worthwhile," he said.
The agent had told Chris the application fee would be fully refunded if he canceled within seven days. Chris called to cancel within 45 minutes, left a voicemail and sent an e-mail but got no reply.
"A second email, second voicemail, still no response," he said.
Then a month later, Chris got a big surprise. Citibank mailed him a refinance offer. It turned out the bank had gone ahead and processed his application and charged him that fee.
"I thought I'd canceled this thing," he said. "I was pretty upset and again I called up and got no response."
Not only that, the offer Chris received was unthinkable. A new rate of 12 percent -- double the rate he was currently paying.
"Certainly I wouldn't have refinanced at 12 percent. That's just crazy," he said.
Chris disputed the charge on his American Express card and Citibank said the fee was non-refundable.
"I was watching the news and Michael Finney and 7 On Your side and said ok I'm going to try this," he said.
Chris contacted 7 On Your Side, we reached the folks at Ctibank and things changed quickly. Six months after he made that first call, Chris received the good news.
"Yes, my application fee was going to be refunded," he said. "I got a credit from American Express and Citibank and an apology."
All of his funds were returned.
Citibank would not discuss the case because of privacy rules. However it said if a customer awaiting a refund also files a claim with his credit card company, "We require the customer to withdraw the credit card dispute, so we do not run the risk of paying the refund twice."
The bank said, "We are pleased this situation has been resolved and regret any inconvenience the customer may have experienced."
Now Chris is calmly looking forward to retiring in Maine.
"I think there's a lot of value with 7On Your Side, so I'm very pleased," he said.
So why was that mortgage rate offer so high? Chris says he'd put a block on his credit to prevent identity theft. The bank couldn't access his credit reports, so it couldn't offer him a good rate. If you do refinance, make sure you work closely with the bank so you get the best deal.