A little background: my fiance and I bought our first home in February 2008. We qualified for a first time homebuyer loan. The interest rate is 6.3%. We do not pay PMI. We have about 11% equity. We have paid on time every month, and even paid a little extra towards principal.

A couple of weeks ago, I checked BOA’s mortgage rates and a 30 year fixed were at 5%. Refinancing into one fixed mortgage at that amount would save us a significant amount of money each month.

So I call to ask if we can refinance. They said we wouldn’t have to pay PMI, but the rate they offered me was 6.6%! I asked why I wouldn’t get 5%. They said it was because we didn’t have a whole lot of equity yet. But I feel that’s unfair because if I were a new customer just buying now, I would be getting 5%. Is this typical?

I’m pretty unhappy about this. I am contemplating applying for a mortgage at another (local) bank so we can refinance to a lower rate, but that means I’d have to go through that whole horrible loan process again! It would have been much easier with Bank of America since we already hold the mortgage with them.

Should I be more persistent with them? Or just accept my fate and let the "historically low" interest rates pass us by?
Hi, yes you’re right, we have a split loan, I forgot to spell that out. The interest on the larger chunk is low-ish but the smaller one is higher. Combined, the weighted average is 6.3%. I did suspect that they might tell us we would have to pay PMI if we got a regular 30 year fixed, but they said no, they just offered a ridiculous interest rate higher than our current. They did say, well yes, new customers will get a better rate. But how then are people refinancing at low rates? I guess they are going to another bank?